Abstract: An improved information hiding scheme based-on modified fast correlation vector quantization is proposed to improve visual image quality, decrease the encoding distortion and increase the embedding capacity of the secret data in this paper. Modified fast correlation vector quantization uses the neighbor vectors to encode the current index because of the correlation of the image itself. The proposed method compares encoding distortion between the current index and its neighbor vector selected by secret information with the given threshold to determine the embedding status of the current index. If the encoding distortion is less than the threshold, the current index can be encoded by its neighbor vector and secret information can be embedded at the same time. If the encoding distortion is larger than the threshold, the current index cannot embed secret information. In addition, the method increases the number of neighboring blocks with high payload. The experimental results show that the proposed method decreases image distortion significantly, which means PSNR increasement of 0.018dB-2.125dB for thresholding of 18. It also increases embedding capacity effectively and then improves embedding-efficiency correspondingly. As a result, the proposed method obtains 1.967-4.683 times higher embedding-efficiency compared to Yang’s method.