Abstract: Computational techniques derived from digital image processing are playing a significant role in the security and digital copyrights of multimedia and visual arts. This technology has the effect within the domain of computers. This research presents discrete M-band wavelet transform (MWT) and cosine transform (DCT) based watermarking algorithm by incorporating the principal component analysis (PCA). The proposed algorithm is expected to achieve higher perceptual transparency. Specifically, the developed watermarking scheme can successfully resist common signal processing, such as geometric distortions, and Gaussian noise. In addition, the proposed algorithm can be parameterized, thus resulting in more security. To meet these requirements, the image is transformed by a combination of MWT & DCT. In order to improve the security further, we randomize the watermark image to create three code books. During the watermark embedding, PCA is applied to the coefficients in approximation sub-band. Finally, first few component bands represent an excellent domain for inserting the watermark.