A color image encryption algorithm is proposed based on the position index and chaos theory. First, the plain image is decomposed into its constituent red, green, and blue channels, each of which is resized to form one-dimensional arrays. Then, a permutation mechanism based on the position index values is introduced to effectively decrease the correlation between adjacent pixels by dynamically swapping the pixels of the three components. The Tent–Sine system is employed as a pseudorandom sequence generator to provide chaotic sequences in which the initial values and parameters are calculated from the Secure Hash Algorithm (SHA)-256 hash of the plain image. As a result, the algorithm is sensitive to the plain image. In addition, in contrast to the traditional ciphertext feedback mode, each pixel is modified based on the order of the position index sequences. The results of experimental simulations and extensive cryptanalyses indicate that the algorithm satisfactorily resists various typical attacks.