- We develop a phase-modulated optical system with sparse representation for information encoding and authentication. The optical cryptosystem is developed with cascaded phase-only masks, and the plaintext is encoded into the cascaded phase-only masks based on an iterative phase retrieval algorithm during the encryption. Two simple strategies are developed to generate sparse data: The sparse data are randomly generated from the extracted phase-only masks, and sparse data are randomly generated from the plaintext. These two sparsity strategies are respectively used in the proposed optical security system, and the decrypted images cannot visually render information about the plaintext. Optical authentication method is further applied to verify the decrypted images. It is illustrated that the optical authentication operation with sparsity strategy can provide an additional security layer for the optical security system.