Chaos-based video encryption algorithms are designed based on selective encryption method. Different from many prevailing MPEG-based video encryption designs, this paper lays out a scheme for a two-level H.263-based video cryptosystem, which skillfully combines the traditional selective encryption algorithm with permutation and subsequent masking operation of the coded H.263-based stream. Lastly, the implementation of the proposed cryptosystem on a local area network (LAN) strongly illustrates the efficiency and feasibility of the two-level chaos-based cryptosystem for practical use in many respects, including processing speed, compression ratio, quality of reconstructed image and security level.