This paper presents a new and efficient block cipher encryption system, which includes confusion as well as diffusion processes. While the confusion process is based on the Lorenz chaotic generator, the diffusion process is chess-based. By utilizing the chess horse movement rules, the diffusion process increases the encryption complexity and improves the differential attack measures. Furthermore, combining chaotic and chessbased algorithms increases the length of the encryption key and, hence, makes brute force attacks infeasible. The encryption system is analyzed using miscellaneous evaluation criteria such as pixel correlation coefficients, differential attack measures, histograms and the NIST statistical test suite. Key sensitivity analysis is also performed and the mean square error and entropy measures are calculated. In addition, several examples are presented for different block sizes showing promising results.