Ultrasound (US)-guided diffuse optical tomography (DOT) has demonstrated potential value for breast cancer diagnosis and treatment response assessment. However, in clinical use, the chest wall, poor probe-tissue contact, and tissue heterogeneity can all cause image artifacts. These image artifacts, appearing commonly as hot spots in the non-lesion regions (edge artifacts), can decrease the reconstruction accuracy and cause misinterpretation of lesion images. Here we introduce an iterative, connected component analysis-based image artifact reduction algorithm. A convolutional neural network (CNN) is used to segment co-registered US images to extract the lesion location and size to guide the artifact reduction. We demonstrate its performance using Monte Carlo simulations on VICTRE digital breast phantoms and breast patient images. In simulated tissue mismatch models, this algorithm successfully reduces edge artifacts without significantly changing the reconstructed target absorption coefficients. With clinical data, it improves the optical contrast between malignant and benign groups, from 1.55 without artifact reduction to 1.91 with artifact reduction. The proposed algorithm has a broad range of applications in other modality-guided DOT imaging.