We present a scheme to generate three-particle hyper-entanglement utilizing polarization and orbital angular momentum (OAM) of photons. We show that the generated state can be used to teleport a two-qubit state described by the polarization and the OAM. The proposed quantum system has also been used to describe a new efficient quantum key distribution (QKD) protocol. We give a sketch of the experimental arrangement to realize the proposed teleportation and the QKD.