Information security has attracted much current attention due to the rapid development of modern technologies, such as computer and internet. We propose a novel method for optical image encryption using multilevel Arnold transform and rotatable-phase-mask noninterferometric imaging. An optical image encryption scheme is developed in the gyrator transform domain, and one phase-only mask (i.e., phase grating) is rotated and updated during image encryption. For the decryption, an iterative retrieval algorithm is proposed to extract high-quality plaintexts. Conventional encoding methods (such as digital holography) have been proven vulnerably to the attacks, and the proposed optical encoding scheme can effectively eliminate security deficiency and significantly enhance cryptosystem security. The proposed strategy based on the rotatable phase-only mask can provide a new alternative for data/image encryption in the noninterferometric imaging.