Thirteen security requirements for an ideal password authentication scheme using smart cards are listed and a new smart card based password authentication scheme with identity anonymity is proposed. The new scheme can satisfy all the listed ideal security requirements and has the following merits: ① it can resist all the attacks listed in introduction; ② less storage mem- ory requirement due to no verification table stored in server; ③ low computational cost due to hash functions based operations; ④ even if the smart card is lost, the new system is still secure; ⑤ As user identity is anonymous, this scheme is more practical. The new proposed scheme can be applied in source constraint networks. Thirteen security requirements for an ideal password authentication scheme using smart cards are listed and a new smart card based password authentication scheme with identity anonymity is proposed. The new scheme can satisfy all the listed ideal security requirements and has the following merits: ① it can resist all the attacks listed in introduction; ② less storage mem- ory requirement due to no verification table stored in server; ③ low computational cost due to hash functions based operations; ④ even if the smart card is lost, the new system is still secure; ⑤ As user identity is anonymous, this scheme is more practical. The new proposed scheme can be applied in source constraint networks.