An image adaptive semi-fragile watermarking algorithm was proposed by considering the human visual perception. First, the bit depth to be embedded was determined by exploiting the luminance, and texture masking characteristics. Then, the watermark is embedded into the host image with adaptive least significant Bit substitution. The watermark strength is dependent on the host image features due to the use of the visual perception features. Finally, an optimal pixel adjustment process is used to further enhance the transparency. Experiment results show that the proposed algorithm is sensitive to malicious attacks while robust to incidental attacks, and can classify effectively the type of attacks encountered on the watermarked image. When compared with some existing semi-fragile watermarking methods, the proposed scheme achieves about 2.90 dB higher PSNR.