A novel solution to the problem of data embedding in images is proposed in h s paper. The proposed algorithm allows high capacity data embedding and is robust to JPEG image compression. Datais embedded in the wavelet domain whichprovides better perceptual maslung compared to the DCT domain. Set Partitioning in Hierarchcal Trees (SPIHT) is used to control the distortion (in the sense of PSNR) in the embedded host. Unhke other data embedding algorithms available in literature, the proposed algorithm provides control over the BER of the embedded data by appropriately choosing the JPEG quantization matrix. Preliminary results of an implementation of the algorithm are also presented.