A new watermarking scheme which incorporates wavelet and spatial transformation has been developed for digital images in this paper. This algorithm utilizes the wavelet multiresolutional structure to construct the image frequency components and the chaotic transformation as two dimensional integer vector generators for spatial transform to select the location during the watermark embedding. To efficiently embed the watermark within the image without the loss of image quality and provide the robustness for the watermark detection under attacks, a modular based spatial threshold and adjustment scheme of the wavelet coefficients has been developed in this research. Unlike other watermarking schemes which usually rely on significantly large amount of side information for watermark detection, our algorithm need only few key parameters to detect the watermark with meaningful content. Compared with some known approaches of watermarking schemes, this algorithm results in superior robustness and information protection for keeping watermark intact under image processing attacks like image compression.