Concerning the problems of complicated structure and revolution of 2D traditional neighborhood cellular automata, low encrypting efficiency, little key space of 1D cellular automata, low diffusion speed and needing multiple rounds iteration to produce avalanche effect, a new encryption algorithm based on 2D X-type reversible cellular automata and Arnold transformation was proposed. Firstly, the plaintext was evolved by the proposed cellular automata, then it was transformed by Arnold transformation and cyclic shift transformation after every evolution, until the ciphertext was encrypted well enough. The experimental result shows that the key space is increased by 16.8% and has perfect robustness in resisting brute force attack. In addition the diffusion and confusion is so excellent that it can produce higher avalanche effect and resist chosen plaintext attack.