MIMO two-way multi-hop networks are considered in which the radio resource is fully reused in all multi-hop links to increase spectrum efficiency while the adjacent interference signals are cancelled by MIMO processing. In addition, the nodes in the multi-hop network optimize their transmit powers to mitigate the remaining overreach interference. Our main contribution in this paper is to investigate an efficient relay placement method with power allocation in such networks. We present two formulations, namely QoS-constrained optimization and SINR balancing, and solve them using a sequential geometric programming method. The proposed algorithm takes advantage of convex optimization to find an efficient configuration. Simulation results show that relay placement has an important impact on the effectiveness of power allocation to mitigate the interference. Particularly, we found that an uniform relay location is optimal only in power-limited scenarios. With optimal relay locations, significant end-to-end rate gain and power consumption reduction are achieved by SINR balancing and QoS-constrained optimization, respectively. Furthermore, the optimal number of hops is investigated in power or interference-limited scenarios.