An image encryption and corresponding decoding method applicable to security verification are presented. This method exploits a holographic process in that an encoded image can be regarded as a hologram pattern resulting from interferences between two waves transmitted through a primary identification image and a reference image serving as an encryption key. We show that the proposed method produces a real‐valued encoded image, which facilitates card manufacturing. Moreover, due to the fact that data to be used as the encryption key are real, the decoding system is also easily realized with an amplitude type SLM. The proposed method is justified with various simulation results obtained with data of real‐positive or phase‐only type for encoded image and encryption key. © 1996 Society of Photo−Optical Instrumentation Engineers.