In view of the information security questions, the information hiding technology already becomes the hot spot in the research field. On the basis of the predictive coding, an algorithm using the prediction error to carry on the information hiding is proposed in this paper. In order to restrain the error diffusion which possibly appears during the anti-predictive coding in the information hiding process, an improved predictive coding algorithm is put forward. Through the experiments, the performances of the basic algorithm and improved algorithm are tested, resulting in the proof of the thread correctness. At the same time, the improved algorithm achieves the ultra large information capacity of 0.953 bits/Byte and the PSNR of 49.184dB so as to verify the validity of the improved algorithm.