With the high-precision magnetic survey data obtained from the Xiayu iron deposit as the basis, the author adopted the wavelet multi-scale analytical method to decompose the magnetic anomaly into space of different scales and, in combination with spectrum analysis method, effectively obtained field source anomaly characteristics at different depths of the Xiayu iron ore deposit, thus improving the interpretation precision of the magnetic anomaly. It is inferred that there exists no iron ore body below 200 m in the Xiayu iron deposit. The geological body model established on the basis of geological data available were utilized to display the shape of the ore body through two-degree-and-a-half interactive inverse fitting, and the depth of the corresponding anomaly body was analyzed. The results obtained further prove the accuracy of the wavelet multi-scale decomposition method in judging the distribution of the ore body from another angle.