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This paper presents a novel approach of building a secure data hiding technique in digital images. The image steganography technique takes the advantage of limited power of human visual system (HVS). It uses image as cover media for embedding secret message. The most important requirement for a steganographic algorithm is to be imperceptible while maximizing the size of the payload. In this paper a method is proposed to encrypt the secret bits of the message based on chaos theory before embedding into the cover image. A 3-3-2 LSB insertion method has been used for image steganography. Experimental results show a substantial improvement in the Peak Signal to Noise Ratio (PSNR) and Image Fidelity (IF) value of the proposed technique over the base technique of 3-3-2 LSB insertion.