To explore the effect of the full iterative model reconstruction algorithm (IMR) on chest CT image processing and its adoption value in the clinical diagnosis of lung cancer patients, multislice spiral CT (MSCT) scans were performed on 96 patients with pulmonary nodules. Reconstruction was performed by hybrid iterative reconstruction (iDose4) and IMR2 algorithms. Then, the image contrast, spatial resolution, density resolution, image uniformity, and noise of the CT reconstructed image were recorded. The benign and malignant pulmonary nodules of patients were collected and classified into malignant pulmonary nodule group and benign pulmonary nodule group, and the differences in chest CT imaging characteristics between the two groups were compared. The subject’s receiver operating characteristic (ROC) curve was used to analyze the diagnostic sensitivity, specificity, and area under the curve (AUC) of CT for benign and malignant pulmonary nodules. It was found that the spatial resolution, density resolution, image uniformity, and contrast of the CT image reconstructed by the IMR2 algorithm were remarkably greater than those of the iDose4 algorithm, and the noise was considerably less than that of the iDose4 algorithm ( P < 0.05 ). Among 96 patients with pulmonary nodules, 65 were malignant nodules, including 15 squamous cell carcinoma, 31 adenocarcinoma, and 19 small cell carcinomas. There were 31 cases of benign nodules, including 14 cases of hamartoma, 10 cases of tuberculous granuloma, 2 cases of sclerosing hemangioma, and 5 cases of diffuse lymphocyte proliferation. The pulmonary nodule malignant group and the pulmonary nodule benign group had statistical differences in pulmonary nodule size, nodule morphology, burr sign, lobular sign, vascular sign, bronchial sign, and pleural depression sign ( P < 0.05 ). The sensitivity, specificity, and area under the curve (AUC) of IMR2 algorithm processing chest CT images for liver cancer diagnosis were 85.7%, 82.3%, and 0.815, respectively, which were significantly higher than the original CT images ( P < 0.05 ). In short, chest MSCT based on the IMR2 algorithm can greatly improve the diagnosis efficiency of lung cancer and had practical significance for the timely detection of early lung cancer.