New methods and apparatuses for information security have evolved as a result of the rapid expansion of optical information processing. Security is one of the major issues in digital image transmission because it can deliver very secret information to any corresponding agency such as the military, biomedical, and security agencies. Previously, various techniques are proposed to perform optical image encryption techniques using different transformation and pixel-level techniques. Each work has its advantages and disadvantages in terms of computational complexity, security level, flexibility, quality, and so on. To overcome the security issues present in the previous works, a novel optical image encryption standard is proposed in this paper. This work uses information hiding followed by image encryption using Gyrator Transform (GT) using mean gradient key-based block swapping techniques. The main advantage of this work is that the key generation is dynamic and it depends upon the pixel intensity of 8 × 8 blocks. Secret information hiding is performed in the Discrete Cosine Transform (DCT) domain to protect the data against noise attacks. To analyze the performance, various evaluation metrics are used to measure the quality of the decrypted image under various distortions such as cropping and rotation. The robustness of information hiding is analyzed using a noise attack on the received image. This work achieved 45.6 dB of Peak Signal-to-Noise Ratio (PSNR) and 0.965 of Structural Similarity Index (SSIM), which is the best when compared to the conventional image encryption standards.