The "password" context option can also be used to provide the passphrase for the keyfile supplied by "privkey_file" and "pubkey_file".

Note this bug: https://bugs.php.net/bug.php?id=58573
Encrypted keys may not work unless you build libssh2 against openssl. (It only worked for me on Debian Wheezy once I recompiled the library).

Be aware that opendir is currently broken on sftp root directories, but you can work around it by appending a dot. See https://bugs.php.net/bug.php?id=64169 and http://stackoverflow.com/a/16238476/69173.

Please beware of a PHP bug, noted by thomas at gielfeldt dot dk, that you must intval() the connection variable before putting it in the connection string :

<?php
$connection = ssh2_connect('shell.example.com', 22);
ssh2_auth_password($connection, 'username', 'password');
$sftp = ssh2_sftp($connection);
// See: https://bugs.php.net/bug.php?id=73597
$stream = fopen("ssh2.sftp://" . intval($sftp) . "/path/to/file", 'r');
?>

<?php
// Connect with public key.
$session = ssh2_connect('example.com', 22);
$result = ssh2_auth_pubkey_file($session, 'remote-username', '/home/local-username/.ssh/id_rsa.pub',
                                                             '/home/local-username/.ssh/id_rsa', 
                                                             'secret');
// Setup sftp stream wrapper
$sftp = ssh2_sftp($session);
// See: https://bugs.php.net/bug.php?id=73597
$connection_string = 'ssh2.sftp://' . intval($sftp);

// List files in remote homedir.
$i = new \RecursiveDirectoryIterator("$connection_string/home/remote-username");
$r = new \RecursiveIteratorIterator($i);
foreach ($r as $f) {
    print $f->getPathname() . "\n";
}
?>