A reversible watermarking algorithm with very high data-hiding capacity has been developed for color images. The algorithm allows the watermarking process to be reversed, which restores the exact original image. The algorithm hides several bits in the difference expansion of vectors of adjacent pixels. The required general reversible integer transform and the necessary conditions to avoid underflow and overflow are derived for any vector of arbitrary length. Also, the potential payload size that can be embedded into a host image is discussed, and a feedback system for controlling this size is developed. In addition, to maximize the amount of data that can be hidden into an image, the embedding algorithm can be applied recursively across the color components. Simulation results using spatial triplets, spatial quads, cross-color triplets, and cross-color quads are presented and compared with the existing reversible watermarking algorithms. These results indicate that the spatial, quad-based algorithm allows for hiding the largest payload at the highest signal-to-noise ratio.