On-board cone-beam computed tomography (CBCT) is a new imaging technique for radiation therapy guidance, which provides volumetric information of a patient at treatment position. CBCT improves the setup accuracy and may be used for dose reconstruction. However, there is great concern that the repeated use of CBCT during a treatment course delivers too much of an extra dose to the patient. To reduce the CBCT dose, one needs to lower the total mAs of the x-ray tube current, which usually leads to reduced image quality. Our goal of this work is to develop an effective method that enables one to achieve a clinically acceptable CBCT image with as low as possible mAs without compromising quality. An iterative image reconstruction algorithm based on a penalized weighted least-squares (PWLS) principle was developed for this purpose. To preserve edges in the reconstructed images, we designed an anisotropic penalty term of a quadratic form. The algorithm was evaluated with a CT quality assurance phantom and an anthropomorphic head phantom. Compared with conventional isotropic penalty, the PWLS image reconstruction algorithm with anisotropic penalty shows better resolution preservation.