A number of methods have been proposed in the literature for the encryption of two-dimensional image information using optical systems based on the fractional Fourier transform (FRT). We present an image encryption technique, which is based on a recently proposed method of phase retrieval using the FRT. The optical implementation of the method is mentioned and digital simulations are presented. The technique is shown to be a powerful method of digital data and image encryption. In this paper, we outline the implementation of the algorithm and examine the sensitivities of the various encryption keys. We also compare the performance of the new technique to digital implementations of other FRT-based optical encryption schemes.