The distal interlocking of intramedullary nail remains a technically demanding procedure. Existing augmented reality based solutions still suffer from hand-eye coordination problem, prolonged operation time, and inadequate resolution. In this study, an augmented reality based navigation system for distal interlocking of intramedullary nail is developed using Microsoft HoloLens 2, the state-of-the-art optical see-through head-mounted display. A customized registration cube is designed to assist surgeons with better depth perception when performing registration procedures. During drilling, surgeons can obtain accurate and in-situ visualization of intramedullary nail and drilling path, and dynamic navigation is enabled. An intraoperative warning system is proposed to provide intuitive feedback of real-time deviations and electromagnetic disturbances. The preclinical phantom experiment showed that the reprojection errors along the X, Y, and Z axes were 1.55 ± 0.27 mm, 1.71 ± 0.40 mm, and 2.84 ± 0.78 mm, respectively. The end-to-end evaluation method indicated the distance error was 1.61 ± 0.44 mm, and the 3D angle error was 1.46 ± 0.46°. A cadaver experiment was also conducted to evaluate the feasibility of the system. Our system has potential advantages over the 2D-screen based navigation system and the pointing device based navigation system in terms of accuracy and time consumption, and has tremendous application prospects.