  We propose a new scheme for quantum key distribution using macroscopic
non-classical pulses of light having of the order 10^6 photons per pulse.
Sub-shot-noise quantum correlation between the two polarization modes in a
pulse gives the necessary sensitivity to eavesdropping that ensures the
security of the protocol. We consider pulses of two-mode squeezed light
generated by a type-II seeded parametric amplification process. We analyze the
security of the system in terms of the effect of an eavesdropper on the bit
error rates for the legitimate parties in the key distribution system. We also
consider the effects of imperfect detectors and lossy channels on the security
of the scheme.
