This paper proposes a novel scheme of scalable coding for encrypted images. In the encryption phase, the original pixel values are masked by a modulo-256 addition with pseudorandom numbers that are derived from a secret key. After decomposing the encrypted data into a downsampled subimage and several data sets with a multiple-resolution construction, an encoder quantizes the subimage and the Hadamard coefficients of each data set to reduce the data amount. Then, the data of quantized subimage and coefficients are regarded as a set of bitstreams. At the receiver side, while a subimage is decrypted to provide the rough information of the original content, the quantized coefficients can be used to reconstruct the detailed content with an iteratively updating procedure. Because of the hierarchical coding mechanism, the principal original content with higher resolution can be reconstructed when more bitstreams are received.