Information security is one of the major problem faced nowadays since the number of internet users is increasing and secret information is getting shared every second. This has also hiked the cyber-crime and threat of malicious access. The two main techniques that are used for information security are steganography and cryptography. Cryptography can be basically considered as secret writing; on the other hand, Steganography can be considered as data hiding. In this project, a hybrid technique for data security is proposed by combining the cryptography and steganography properties. The proposed image steganography algorithm works on improvement of data embedding capacity. Implementation of image processing is implemented using modified LSB approach which showed improved results in terms of image quality and data hiding capacity. The aim of this work is to implement a system for data security as well as improve the data hiding capacity. The results show increased image quality and fewer distortions. Also proposed key exchange protocol will aid in security.