The rapid expansion of cloud-based platforms to store and transmit sensitive data has raised animperativetodevelop reliable and fully reversible strategies that maintain data privacy protection of images and allowembeddingadditional data. Traditional reversible approaches to data hiding (RDH) are not effective with encrypted images, whereencryption breaks spatial redundancy and capacity. To ensure this, we would suggest a stepwise restoration-basedRDHscheme of encrypted images (RDH-EI). The system operates on two-key management strategy meaning the encryptionanddata-hiding keys are non-dependent, thus each can be performed independently to extract data and decoding of theimage.The data is coded on a series of least significant bit (LSB) layers with improved capacity and lowdistortion. Theexperimental findings indicate that safe, loss‑free restoration of both secreted information and original photographsisachievable, and as a consequence, the method is highly suitable in cloud storage, medical imaging, rights administration,and safe communications. Keywords—Reversible Data Hiding (RDH), Encrypted Images, stepwise restoration