Image steganography is art of hiding information onto the cover image. In this proposal a transformed domain based gray scale image authentication/data hiding technique using Z transform (ZT) termed as FDSZT, has been proposed. ZTransform is applied on 2x2 masks of the source image in row major order to transform original sub image (cover image) block to its corresponding frequency domain. One bit of the hidden image is embedded in each mask of the source image onto the fourth LSB of transformed coefficient based on median value of the mask. A delicate handle has also been performed as post embedding operation for proper decoding. Stego sub image is obtained through a reverse transform as final step of embedding in a mask. During the process of embedding, dimension of the hidden image followed by the content of the message/hidden image are embedded. Reverse process is followed during decoding. High PSNR obtained for various images conform the quality of invisible watermark of FDSZT.