A new image hiding scheme is proposed that can embed color secret images into color host images. The secret image to be embedded is first color quantized using a palette previously sorted by the principal component analysis technique to generate the indexed color image. Then the concept of pixel difference is employed to process both the host image and the indexed color image. Then the difference image of the indexed color image is embedded into the difference image of the color host image. According to our experimental results, the image quality of the stegoimage is quite good when our new method is used to embed a color secret image into the color host image.