The gyrator transform hologram is proposed. The generation and the reconstruction of the gyrator transform hologram are simulated by using the fast algorithm for computing the gyrator transform. This new type hologram based on phase-shifting digital hologram is also studied. A novel method is proposed for optical image encryption by using sinusoidal phase gratings based on the methods mentioned above. In this proposal method, the angle of gyrator transform, the frequency and the rotation angle of the gratings are regarded as the encryption keys according to the rotation properties of the gyrator transform in the phase space. Two or more cascaded gyrator transform systems are applied to realize the image encryption. The simulation experiments are performed with two cascaded gyrator transform systems on the basis of the phase-shifting digital hologram. The results confirm the feasibility, validity and the secure performance of the proposal method.