Diffuse tomography with near-infrared light has biomedical application for imaging hemoglobin, water, lipids, cytochromes, or exogenous contrast agents and is being investigated for breast cancer diagnosis. A Newton-Raphson inversion algorithm is used for image reconstruction of tissue optical absorption and transport scattering coefficients from frequency-domain measurements of modulated phase shift and light intensity. A variant of Tikhonov regularization is examined in which radial variation is allowed in the value of the regularization parameter. This method minimizes high-frequency noise in the reconstructed image near the source-detector locations and can produce constant image resolution and contrast across the image field.