Abstract: In this paper, a new digital audio watermarking algorithm based on adaptive quantization is presented. A visually recognizable binary watermark image is first converted into a one-dimensional sequence. The sequence is permuted pseudo-randomly and modulated using BCH coding. Then the original digital audio signal is converted into segments and some audio segments are selected. Finally the modulated watermarking signal is embedded into the FFT coefficients by means of adaptive quantizaiton. The proposed algorithm can extract the watermark without the original audio signal. Experimental results show that the proposed watermarking scheme is inaudible and robust against various signal-processing operations such as noise addition, lossy compression, low pass filtering, re-sampling, and re-quantization.