This paper presents a novel link-layer encryption protocol for wireless sensor networks. The protocol design aims to reduce energy consumption by reducing security related communication overhead. This is done by merging security related data of consecutive packets. The merging (or combining packets) based on simple mathematical operations helps to reduce energy consumption by eliminating the requirement to send security related fields in headers and trailers. We name our protocol as the Compact Security Protocol referred to as C-Sec. In addition to energy savings, the C-Sec protocol also includes a unique security feature of hiding the packet header information. This feature makes it more difficult to trace the flow of wireless communication, and helps to minimize the cost of defending against replay attacks. We performed rigorous testing of the C-Sec protocol and compared it with well-known protocols including TinySec, MiniSec, SNEP and Zigbee. Our performance evaluation demonstrates that the C-Sec protocol outperforms other protocols in terms of energy savings. We also evaluated our protocol with respect to other performance metrics including queuing delay and error probability.