Ultrasound-guided diffuse optical tomography (DOT) is a promising method for characterizing malignant and benign lesions in the female breast. We introduce a new two-step algorithm for DOT inversion in which the optical parameters are estimated with the global optimization method, genetic algorithm. The estimation result is applied as an initial guess to the conjugate gradient (CG) optimization method to obtain the absorption and scattering distributions simultaneously. Simulations and phantom experiments have shown that the maximum absorption and reduced scattering coefficients are reconstructed with less than 10% and 25% errors, respectively. This is in contrast with the CG method alone, which generates about 20% error for the absorption coefficient and does not accurately recover the scattering distribution. A new measure of scattering contrast has been introduced to characterize benign and malignant breast lesions. The results of 16 clinical cases reconstructed with the two-step method demonstrates that, on average, the absorption coefficient and scattering contrast of malignant lesions are about 1.8 and 3.32 times higher than the benign cases, respectively.