The combination of steganography and cryptography is considered as one of the best security methods used for message protection, due to this reason, in this paper, a data hiding system that is based on image steganography and cryptography is proposed to secure data transfer between the source and destination. Animated GIF image is chosen as a carrier file format for the steganography due to a wide use in web pages and a LSB (Least Significant Bits) algorithm is employed to hide the message inside the colors of the pixels of an animated GIF image frames. To increase the security of hiding, each frame of GIF image is converted to 256 color BMP image and the palette of them is sorted and reassign each pixels to its new index, furthermore, the message is encrypted by LZW ( Lempel _ Ziv_Welch) compression algorithm before being hidden in the image frames. The proposed system was evaluated for effectiveness and the result shows that, the encryption and decryption methods used for developing the system make the security of the proposed system more efficient in securing data from unauthorized users. The system is therefore, recommended to be used by the Internet users for establishing a more secure communication.