We consider three-dimensional (3D) localization and imaging of space debris from only one two-dimensional (2D) snapshot image. The technique involves an optical imager that exploits off-center image rotation to encode both the lateral and depth coordinates of point sources, with the latter being encoded in the angle of rotation of the PSF. We formulate 3D localization into a large-scale sparse 3D inverse problem in the discretized form. A recently developed penalty called continuous exact l0 (CEL0) is applied in this problem for the Gaussian noise model. Numerical experiments and comparisons illustrate the efficiency of the algorithm.