A novel fully phase encryption system is proposed based on optical int erference principle and iterative phase retrieval algorithm.In the proposed encryption system,a random phase mask is applied as the unique encryption key.With the help of encryption key,the input secret image is numerically encoded into two phase mas ks,from which the diffraction patterns are visibly unrecognizable but comprise sufficient information for decryption.The image to b e encrypted and the encryption key are respectively used as the constraints in the input and output planes,from wh ich the phase distributions of the encrypted results,i.e., two phase masks respectively placed in the input plane and the Fourier doma in,can be calculated by using the proposed iterative phase retrieval algorithm.The encryption key used in the iterative process intr oduces the pixel scrambling of phase distribution in the input plane.Both the random phase mask and the two pha se masks produced by using the iterative algorithm are indispensable in decryption.Computer simulations demonstrate that the algor ithm achieves a very fast convergence and high security-level.It also can be shown that there is no informat ion disclosure problem in nonlinear double-random-phase encryption or interference-based encryption systems.