Based on the radiative transfer equation and the algebraic reconstruction technique, an advanced algorithm of diffusion optical tomography was developed within the framework of Newton-Raphson’s inversion. The standard algebraic reconstruction technique was improved to achieve simultaneous reconstruction of both the absorption and the scattering images for small-animal-sized geometry. The numerical simulations validated the feasibility of the proposed scheme and demonstrated the superiority of the modified algebraic reconstruction technique over the standard one in separation of both the coefficients.