Abstract A highly secure scalable compression method for stream cipher encrypted images is described in this journal. The input image first undergoes encryption and then shuffling. This shuffling in the image pixels enhances the security. For shuffling, Henon map is used. There are two layers for the scalable compression namely base layer and enhancement layer. Base layer bits are produced by coding a series of non-overlapping patches of uniformly down sampled version of encrypted image. In the enhancement layer pixels are selected by random permutation and then coded. From all the available pixel samples an iterative multi scale technique is used to reconstruct the image and finally performs decryption. The proposed method has high security. Key Words: Encryption, Decryption, Shuffling, Scalable compression