A data hiding technique is proposed for embedding a significant amount of data in digital Images while retaining high perceptual quality. The scheme employs digital communication techniques to achieve high robustness to standard image processing operations. Information is embedded in the wavelet domain by modifying selected wavelet coefficients of the host image. In the past work, the embedded signature data size or the original host image is fixed and predetermined for both transmitter and receiver. In this paper the data size is variable with predefined data limit and the embedded signature data is extracted without knowing the original host image. The signature data is encrypted using Achterbahn-128 stream cipher before embedding it in the wavelet coefficients. This paper intends to propose, the implementation of the data hiding system on FPGA technology. From the simulation results which is applied to the matlab program in order to see the output image (stego image), we can say that the human eyes cannot observe the difference between the original image and stego image.