To improve the quality of the ultimate image, the conventional image reconstruction method and the phase retrieval method are combined and an image reconstruction method of Fourier telescope based on iteration is proposed. A direct reconstructed image is acquired by inverse Fourier transform of the measured Fourier component, and then a threshold image of the direct reconstructed image acts as the initial input for the phase retrieval reconstruction algorithm and a superior image is reconstructed through iteration. Simulation result shows that, compared with direct reconstructed image, the Strehl ratio of reconstructed image from the iterative method raises from 0.83 to 0.88 (50 signal-to-noise ratio) and from 0.89 to 0.93 (100 signal-to-noise ratio), besides the peak value signal-to-noise raises from 17 dB to 19 dB (50 signal-to-noise ratio) and from 20 dB to 22 dB (100 signal-to-noise ratio).