The JPEG image is the most popular file format in relation to digital images. However, up to the present time, there seems to have been very few data hiding techniques taking the JPEG image into account. In this paper, we shall propose a novel high capacity data hiding method based on JPEG. The proposed method employs a capacity table to estimate the number of bits that can be hidden in each DCT component so that significant distortions in the stego‐image can be avoided. The capacity table is derived from the JPEG default quantization table and the Human Visual System (HVS). Then, the adaptive least‐significant bit (LSB) substitution technique is employed to process each quantized DCT coefficient. The proposed data hiding method enables us to control the level of embedding capacity by using a capacity factor. According to our experimental results, our new scheme can achieve an impressively high embedding capacity of around 20% of the compressed image size with little noticeable degradation of image quality.