In this paper, an adaptive image encryption method which achieves high capacity reversible data hiding is proposed. In the proposed encryption method, Burrow's-wheeler transform was applied before encrypting the given image. The resultant encrypted images are comparatively smoother and have higher spatial correlation, which allow high embedding rates. To preserve good visual quality for the approximate image obtained from direct decryption without watermark extraction, data hiding process are carried out block by block within the encrypted image and sorted-variance block embedding is adopted in watermark embedding procedure. In the experimental results, the reversibility of the proposed method is verified, and in comparison with state-of-the-art methods, a higher maximum embedding rate is obtained in the proposed method.