Due to no requirement for direct interpretation of the guided wave signal, probability-based diagnostic imaging (PDI) algorithm is especially suitable for damage identification of complex composite structures. However, the weight distribution function of PDI algorithm is relatively inaccurate. It can reduce the damage localization accuracy. In order to improve the damage localization accuracy, an improved PDI algorithm is proposed. In the proposed algorithm, the weight distribution function is corrected by the acquired relative distances from defects to all actuator–sensor pairs and the reduction of the weight distribution areas. The validity of the proposed algorithm is assessed by identifying damages at different locations on a stiffened composite panel. The results show that the proposed algorithm can identify damage of a stiffened composite panel accurately.