A new method of Semi-fragile image watermarking which ensures the integrity of the contents of digital image is presented. Proposed watermarking scheme embeds watermark in the form of quantization noise on the wavelet transform coefficients in a specific mid frequency subbands selected from a wavelet packet decomposition based on energy distribution of wavelet transform coefficients. By controlling the strength of embedded watermark using HVS (Human Visual System) characteristic, it is imperceptible by a human viewer while robust against non-malicious attack such as compression for storage and/or transmission. When an attack is applied on the original image, it is highly probable that wavelet transform coefficients not only at the exact attack positions but also the neighboring ones are modified. Therefore, proposed authentication method utilizes whether both current coefficient and its neighbors are damaged. together. So it can efficiently detect and accurately localize attacks inflicted on the content of original image. Decision threshold for authentication can be user controlled for different application areas as needed.