Coordination of a power system with the phasor measurement devices in real time on the load and generation sides is carried out within the context of smart grid studies. Power systems equipped with information systems in a smart grid pace with external security threats. Developing a smart grid which can resist against cyber threats is considered indispensable for the uninterrupted operation. In this study, a two-way secure communication methodology underpinned by a chaos-based encryption algorithm for PMU devices is proposed. The (...) proposed system uses the IEEE-14 busbar system on which the optimum PMU placement has been installed. The proposed hyperchaotic system-based encryption method is applied as a new security methodology among PMU devices. The success of results is evaluated by the completeness of data exchange, durations, the complexity of encryption-decryption processes, and strength of cryptography using a microcomputer-based implementation. The results show that the proposed microcomputer-based encryption algorithms can be directly embedded as encryption hardware units into PMU and PDC devices which have very fast signal processing capabilities taking into considerations the acceptable delay time for power system protection and measuring applications and quality metering applications which is 2 ms and 10 ms, respectively. While proposed algorithms can be used in TCP or UDP over IP-based IEEE C37.118, IEC 61850, and IEC 61850-90-5 communication frameworks, they can also be embedded into electronic cards, smartcards, or smart tokens which are utilized for authentication among smart grid components. (shrink)