Abstract: In diffuse optical tomography (DOT), researchers often face challenges to accurately recover the depth and size of the reconstructed objects. Recent development of the Depth Compensation Algorithm (DCA) solves the depth localization problem, but the reconstructed images commonly exhibit over-smoothed boundaries, leading to fuzzy images with low spatial resolution. While conventional DOT solves a linear inverse model by minimizing least squares errors using L2 norm regularization, L1 regularization promotes sparse solutions. The latter may be used to reduce the over-smoothing effect on reconstructed images. In this study, we combined DCA with L1 regularization, and also with L2 regularization, to examine which combined approach provided us with an improved spatial resolution and depth localization for DOT. Laboratory tissue phantoms were utilized for the measurement with a fiber-based and a camera-based DOT imaging system. The results from both systems showed that L1 regularization clearly outperformed L2 regularization in both spatial resolution and depth localization of DOT. An example of functional brain imaging taken from human in vivo measurements was further obtained to support the conclusion of the study.