A new approach of digital watermarking based on information optics is proposed. The watermarking image is transformed into virtual object wave after phase retrieval algorithm. Then use the virtual object wave to take the place of traditional Fourier-transformed object wave. It interfered with the reference wave to form Fourier-transformed digital hologram and the contrast is 100% in theory. Hologram is embedded into host image by discrete-cosine-transform and encrypted by security key. It can be extracted with the security key. The watermark is retrieved by reconstruction of optical or digital holography. Theoretical analysis and numerical experiments show that the algorithm has more robustness and practical value to image lossy compression,cropping and filter,comparing with the algorithm based on general digital holography.