First radially resolved local data on the ion distribution function have been obtained on the Large Helical Device (LHD) from measurements of escaping neutral particle energy spectra by using an impurity pellet ablation cloud as a spatially localized target for the charge exchange with plasma ions. The active diagnostic employs a transversely directed injector of solid pellets and a compact high-resolution neutral particle energy spectrometer capable of observing the ablation cloud throughout the pellet flight across the plasma column. The paper describes the experimental method and presents the initial measurement results. The data analysis is discussed with emphasis on the local ion distribution calculation from the pellet charge-exchange neutral spectra, taking into account the pellet trajectory, the cloud parameters, and the relevant electron capture and stripping cross sections. The estimated carbon/hydrogen ablation cloud neutralization fraction is used for the interpretation of the neutral spectra from tangential neutral beam injection-heated plasmas and from ion cyclotron heating-sustained plasmas.