Difference stencils are fundamental computations throughout a broad range of scientific and engineering computer programs. In order to optimize data locality and communication overhead, this paper proposes a novel alternate tiling stencil algorithm on distributed memory machines by exploiting the property of the iterative algorithm. The serial execution process of this iterative method is given, which introduces the sequence of iterative space tile as the sequence of execution, and uses time skewing technique to divide iteration space. In this process, nodes of the tile can be traversed many times to improve data locality. The parallel algorithm based on iteration space tile technique is presented, which uses an improved polyhedral model to implement the iteration space tiling algorithm and reorders the tiles of iteration space to reduce cache misses, and the cost of communication and synchronization. The theoretical comparison is given between alternate tiling and other parallelization techniques. Finally numerical results are presented to confirm the effectiveness of serial and parallel execution models of alternate tiling finite difference stencil algorithm, specifically compared with domain-decomposition and red-black iterative methods, and show that the new parallel iterative method has a good data locality, parallel efficiency and scalability.