In watermarking schemes, the discrete wavelet transform (DWT) is broadly used because its frequency component separation is very useful. Moreover, LU decomposition has little influence on the visual quality of the watermark. Hence, in this paper, a novel blind watermark algorithm is presented based on LU transform and DWT for the copyright protection of digital images. In this algorithm, the color host image is first performed with DWT. Then, the horizontal and vertical diagonal high frequency components are extracted from the wavelet domain, and the sub-images are divided into 4×4 non-overlapping image blocks. Next, each sub-block is performed with LU decomposition. Finally, the color image watermark is transformed by Arnold permutation, and then it is inserted into the upper triangular matrix. The experimental results imply that this algorithm has good features of invisibility and it is robust against different attacks to a certain degree, such as contrast adjustment, JPEG compression, salt and pepper noise, cropping, and Gaussian noise.