This paper proposes a novel stream encryption scheme with avalanche effect (SESAE). Using this scheme and an ideal pseudorandom number generator (PRNG) to generate d-bit segment binary key streams, one can encrypt a plaintext such that by using any key stream generated from a different seed to decrypt the ciphertext, the decrypted plaintext will become an avalanche-like text which has 2 d − 1 consecutive one’s with a high probability. As a cost, the required bits of the ciphertext are d times those of the plaintext. A corresponding avalanche-type encryption theorem is established. Two chaotic 12-bit segment PRNGs are designed. A generalized FIPS140 test and SESAE test for the two chaotic PRNGs, RC4 12-bit segment PRNG and 12-bit segment Matlab PRNG are implemented. The SESAE tests for 16-bit segment PRNGs are also compared. The results suggest that those PRNGs are able to generate the SESAEs which are similar to those generated via ideal PRNGs.