In intramedullary nail (IMN) surgical operations, one of the main efforts for surgeons is to find the axes of two distal holes. Two distal holes on an IMN, which are inside the intramedullary canal of a patient's femur, can only be seen in a lateral X-ray view. For the standard surgical procedure, the localization of the distal hole axes is a trial-and-error process which results in a long surgical time and large dose of X-ray exposure. In this paper, an algorithm to derive the three-dimensional position and orientation of the distal hole axis was developed. The algorithm first derives the nail axis through two X-ray images. Then the distal hole axis is calculated through projecting back the hole boundary on the X-ray image from a lateral view to three-dimensional space. A least-squares method is used to determine the centres of the front hole and the back hole through iteration. The algorithm has been tested with real data and it was robust.