The aim of this study was to investigate the values of computed tomography (CT) imaging technology based on image segmentation algorithm (ISA). It was applied in the radial shock wave therapy (RSWT) to treat knee osteoarthritis (KOA), so its curative effect and rehabilitation effect on nerve function were mainly analyzed in this study. 84 patients with KOA were selected and grouped into an ultrasonic treatment group (group A) and a RSW group (group B). All the patients received the ISA-based CT examination and high-quality nursing intervention. There were comparisons on the effects of pain improvement, knee joint function, and nerve function rehabilitation of patients in groups A and B. Results showed that visual analogue scale (VAS) scores before and after treatment were markedly different among all patients, and the pain degree of patients in group B was lower than the degree of group A (P < 0.05). The knee joint function of group B after treatment was greatly better than group A (P < 0.05). Scandinavian stroke scale (SSS) scores of nerve function rehabilitation after nursing in patients from group B were sharply lower than the scores of group A (P < 0.05). Results indicated that ISA-based CT images could be applied in analysis of curative effect on KOA, and there was more obvious effect of RSWT in the treatment of KOA.