The first digital zenith telescope prototype (DZT-1) of China was successfully developed by National Astronomical Observatories, Chinese Academy of Sciences and Shandong University of Science and Technology at the end of 2011. Compared with classical astrometric telescopes, DZT-1 has features of small size, high automation, and high accuracy. It can be used to do classical astrometric observations as well as measurement of plumb line variation and deflection of the vertical. So DZT-1 plays a significant role in astronomy and geoscience. Although the measurement principle and method of DZT-1 are somewhat similar to classical photographic zenith tube, there are still many differences. The present paper introduces the principle, method, and procedure for processing DZT-1 star image and data, as well as the application software for astronomical latitude and longitude calculation using DZT-1 observations. The test observations and the observation results are also presented. According to the test observation results, the standard deviation of single observation is about 0.2″–0.3″, and 0.07″–0.08″ in term of a group observations. In conclusion, the data processing software fulfills DZT-1’s demand for data processing, guaranteeing the automation and high accuracy for DZT-1.