Phosphorescence lifetime measurement based on a frequency domain approach is used to estimate oxygen tension in large retinal blood vessels. The classical least squares (LS) estimation was initially used to determine oxygen tension indirectly from intermediate variables. A spatial regularized least squares (RLS) method was later proposed to reduce the high variance of oxygen tension estimated by LS method. In this paper, we provide a solution using a modified RLS (MRLS) approach that utilizes prior knowledge about retinal vessels oxygenation based on expected oxygen tension values in retinal arteries and veins. The performance of MRLS method was evaluated in simulated and experimental data by determining the bias, variance, and mean absolute error (MAE) of oxygen tension measurements and comparing these parameters with those derived with the use of LS and RLS methods.