A novel optical image encryption scheme based on interference is proposed. The original image is digitally encoded into one phase-only mask by employing an improved Gerchberg-Saxton phase retrieval algorithm together with another predefined random phase mask which serves as the encryption key. The decryption process can be implemented optically based on Michelson interferometer by using the same key. The scheme can be regarded as a stream-cipher-like encryption system, the encryption and decryption keys are the same, however the operations are different. The position coordinates and light wavelength can also be used as additional keys during the decryption. Numerical simulations have demonstrated the validity and robustness of the proposed method.