This paper introduces an enhanced image authentication technique providing greater security with uncompromising visual quality. To augment data security, the authenticating information is diffused into the transformed coefficients of both the levels after a two level Discrete Haar Wavelet Transform. In addition a bit level noise reduction algorithm increases the imperceptibility of the added noise. The extraction algorithm is completely blind and authenticity is verified by regenerating a message digest at the receiving end. The algorithm has been tested against some related attacks and is appropriate in smart card design. Performance comparisons exhibit significant growth over other similar techniques.