A new method based on the advantages of quaternion and encrypted Fourier holography was put forward to improve the robustness against attacks and it was used for color image watermark embedding and extraction. The quaternion discrete Fourier transform and encrypted Fourier holography were applied in digital watermark algorithm. At first, the color image was represented in the form of quaternion matrix by translating the data type, and then subjected to quaternion discrete Fourier transform. At last, the hologram was embedded into frequency matrix with an appropriate coefficient which was obtained by repeated calculation on the basis of human visual system. The experiments showed that the method had good performance in invisibility and disposed the host color image as a whole. Meanwhile, it also improved the robustness against cut attacks in quaternion domain watermarking. The watermarking algorithm met the demand of invisibility and robustness and was effective in digital anti-counterfeiting and copyright protection.