The design of a chaotic system and pseudo-random sequence generation method with excellent performance and its application in image encryption have always been attractive and challenging research fields. In this paper, a new model of parameter-variabled coupled chaotic system (PVCCS) is established by interaction coupling between parameters and states of multiple low-dimensional chaotic systems, and a new way to construct more complex hyperchaotic systems from simple low-dimensional systems is obtained. At the same time, based on this model and dynamical DNA codings and operations, a new pseudo-random sequence generation method (PSGM-3DPVCCS/DNA) is proposed, and it is verified that the generated pseudo-random sequence of PSGM-3DPVCCS/DNA has excellent random characteristics. Furthermore, this paper designs a novel pixel chain diffusion image encryption algorithm based on the proposed parameter-variabled coupled chaotic system (PVCCS) in which the hash value of plaintext image is associated with the initial key to participate in the encryption process so that the encryption key is closely associated with plaintext, which improves the security of the algorithm and effectively resists the differential cryptanalysis risk. In addition, an information hiding method is designed to hide the hash value of plaintext image in ciphertext image so that the hash value does not need to be transmitted in each encryption, and the initial key can be reused, which solves the key management problem in application and improves the application efficiency of the encryption algorithm. The experimental analysis shows that the chaotic system constructed in this paper is creative and universal and has more excellent chaotic characteristics than the original low-dimensional system. The sequence generated by the pseudo-random sequence generation method has excellent pseudo-random characteristics and security, and the image encryption algorithm can effectively resist differential cryptanalysis risk, showing advanced encryption performance.