The method for generating a secret key for encrypted wireless communications is a physical layer technique that exploits channel randomness between two nodes, the channel being characterized by reciprocity between the two nodes. Reference signals exchanged by the two nodes are used to faun a channel estimate, including gain location and phase location. The gain and phase locations are compared to threshold values, and locations exceeding the respective thresholds are stored in vectors. The moving differences between gain and phase locations at adjacent sampling times define secondary random processes. The moving difference values are quantized and converted to bit streams, which are concatenated to generate the secret key. Measures are provided to reduce parity errors, thereby reducing the bit mismatch rate (BMR).