We propose a novel image encryption algorithm based on two pseudorandom bit generators: Chebyshev map based and rotation equation based. The first is used for permutation, and the second one for substitution operations. Detailed security analysis has been provided on the novel image encryption algorithm using visual testing, key space evaluation, histogram analysis, information entropy calculation, correlation coefficient analysis, differential analysis, key sensitivity test, and computational and complexity analysis. Based on the theoretical and empirical results the novel image encryption scheme demonstrates an excellent level of security.