An inverse algorithm of the two-way parabolic equation method is presented based on the inverse algorithm of one-way parabolic equation in order to localize objects in remote sensing, automatic navigation and electronic warfare, et al. It is applied to research the localization of obstacles in atmospheric duct environments. The effects of the atmospheric duct on the accuracy of localization are analyzed by using the interpolation method. The simulated results show that the obstacles on the propagation path can be detected and located by the inverse algorithm of the two-way parabolic equation method, and the atmospheric duct has a major impact on the location accuracy.