Abstract: Localization algorithm for holes on intramedullary nail based on three dimensional images was proposed. Firstly, intramedullary nail was scanned by CT, and a three dimensional (3D) model was obtained according to the CT images. Secondly, a positioning sensor was mounted on the intramedullary nail. The 3D model was registered into the coordinate frame of a positioning system for the intramedullary nail tracking. Finally, a bone drill mounted with a positioning sensor was used to aim at the holes on the intramedullary nail. Two thresholds, the distance threshold and angle threshold, were used to estimate the location relationship of the bone drill and nail hole. The distance threshold was used to determine the distance between the bone drill tip and the center axes of nail hole. The angle threshold was employed to determine the intersection angle between the bone drill and the hole. When the two thresholds were full satisfaction, the bone drill could be allowed to execute bone surgery according to the navigation instruction. Test results show the accuracy and validity of the proposed method. The drill can be placed into the holes on the intramedullary nail accurately, satisfying the need of reconstructive surgery.