The improved range Doppler algorithm is proposed to abate the trade-off between resolutions and depth of focus in spectral domain optical coherence tomography. By considering the finite beam width and the shape of the wavefronts produced by the Gaussian beam, a physical diffraction model is presented to simulate the light propagation process in the sample. The two-dimensional processing of the spectrum data is decomposed into two one-dimensional processings of Stolt transform and matched filter. Experimental results show that image reconstruction can be achieved. The transverse and axial resolutions are both improved significantly, especially in the out-of-focus range, and the resolutions are almost equivalent throughout the entire region of interest.