We present a novel method for estimation of the fiber orientation distribution (FOD) function based on diffusion-weighted magnetic resonance imaging (D-MRI) data. We formulate the problem of FOD estimation as a regression problem through spherical deconvolution and a sparse representation of the FOD by a spherical needlets basis that forms a multi-resolution tight frame for spherical functions. This sparse representation allows us to estimate the FOD by ∂1-penalized regression under a non-negativity constraint on the estimated FOD. The resulting convex optimization problem is solved by an alternating direction method of multipliers (ADMM) algorithm. The proposed method leads to a reconstruction of the FOD that is accurate, has low variability and preserves sharp features. Through extensive experiments, we demonstrate the effectiveness and favorable performance of the proposed method compared to three existing methods. Specifically, we demonstrate that the proposed method is able to successfully resolve fiber crossings at small angles and automatically identify isotropic diffusion. We also apply the proposed method to real 3T D-MRI data sets of healthy individuals. The results show realistic depictions of crossing fibers that are more accurate, less noisy, and lead to superior tractography results compared to competing methods.