This research was aimed to explore the application of high-resolution computed tomography (HRCT) based on intelligent iterative reconstruction technique in the early diagnosis and treatment of bronchiolitis obliterans (BO) in children and to explore the efficacy of traditional Chinese medicine (TCM) in resolving phlegm and removing blood stasis. Sixty pediatric patients with BO were selected as the study subjects and diagnosed by HRCT scanning, and the scanned images were processed by iterative reconstruction technique. The patients were treated with TCM therapy of resolving phlegm and removing blood stasis alone (group A), HRCT-guided TCM therapy of resolving phlegm and removing blood stasis (group B), and iterative reconstruction HRCT-guided TCM therapy of resolving phlegm and removing blood stasis (group C). The results showed that the lung HRCT image after iterative reconstruction was closer to the original image than that after filtered back projection reconstruction, and the edge of the image after filtered back projection reconstruction was more blurred and the noise was higher. The image obtained by iterative reconstruction technique was smoother and clearer, and the image stability after iterative reconstruction was higher. The treatment results showed that the proportion of moderate and severe obstruction in group C was 5.18%, which was significantly lower than that in group A (18.75%) and group B (11.29%), and group B was significantly lower than that in group A (18.75%) (
P
<
0.05
). The proportion of clinical effect in group C after treatment was 70.18%, significantly higher than that in group A (55.5%) and group B (63.34%), and that in group B was significantly higher than that in group A (55.5%) (
P
<
0.05
). In summary, the lung HRCT after iterative reconstruction can more clearly and intuitively show the lesion site, which has a key role in guiding the early diagnosis and treatment planning of BO; the HRCT image based on iterative reconstruction technique combined with TCM treatment of removing blood stasis and resolving phlegm has a better therapeutic effect on children, with a high application value.