In order to overcome the difficulty of key management in “one time pad” encryption schemes and also resist the attack of chosen plaintext, a new image encryption algorithm based on chaos and SHA-256 is proposed in this paper. The architecture of confusion and diffusion is adopted. Firstly, the surrounding of a plaintext image is surrounded by a sequence generated from the SHA-256 hash value of the plaintext to ensure that each encrypted result is different. Secondly, the image is scrambled according to the random sequence obtained by adding the disturbance term associated with the plaintext to the chaotic sequence. Third, the cyphertext (plaintext) feedback mechanism of the dynamic index in the diffusion stage is adopted, that is, the location index of the cyphertext (plaintext) used for feedback is dynamic. The above measures can ensure that the algorithm can resist chosen plaintext attacks and can overcome the difficulty of key management in “one time pad” encryption scheme. Also, experimental results such as key space analysis, key sensitivity analysis, differential analysis, histograms, information entropy, and correlation coefficients show that the image encryption algorithm is safe and reliable, and has high application potential.