We present measurements of the angular diameter distance D _ { A } ( z ) and the Hubble parameter H ( z ) at z = 0.35 using the anisotropy of the baryon acoustic oscillation ( BAO ) signal measured in the galaxy clustering distribution of the Sloan Digital Sky Survey ( SDSS ) Data Release 7 ( DR7 ) Luminous Red Galaxies ( LRG ) sample . Our work is the first to apply density-field reconstruction to an anisotropic analysis of the acoustic peak . Reconstruction partially removes the effects of non-linear evolution and redshift-space distortions in order to sharpen the acoustic signal . We present the theoretical framework behind the anisotropic BAO signal and give a detailed account of the fitting model we use to extract this signal from the data . Our method focuses only on the acoustic peak anisotropy , rather than the more model-dependent anisotropic information from the broadband power . We test the robustness of our analysis methods on 160 LasDamas DR7 mock catalogues and find that our models are unbiased at the \sim 0.2 \% level in measuring the BAO anisotropy . After reconstruction we measure D _ { A } ( z = 0.35 ) = 1050 \pm 38 Mpc and H ( z = 0.35 ) = 84.4 \pm 7.0 km/s/Mpc assuming a sound horizon of r _ { s } = 152.76 Mpc . Note that these measurements are correlated with a correlation coefficient of 0.57 . This represents a factor of 1.4 improvement in the error on D _ { A } relative to the pre-reconstruction case ; a factor of 1.2 improvement is seen for H .