Magnetic resonance imaging (MRI)-guided transurethral ultrasound therapy is a potential minimally invasive treatment for localized prostate cancer offering precise targeting of tissue within the gland, short treatment times, and the capability to quantify the spatial heating pattern delivered during therapy. A significant challenge in MRI-guided ultrasound therapy is the design and construction of MRI-compatible equipment capable of operation in a closed-bore MR imager. We describe a prototype system developed for MRI-guided transurethral ultrasound therapy and characterize the performance of the different components including the heating applicator design, rotational motor, and radio frequency electronics. The ultrasound heating applicator described in this study incorporates a planar transducer and is capable of producing high intensity ultrasound energy in a localized region of tissue. Results demonstrated that the heating applicator exhibits excellent MRI-compatibility, enabling precise MR temperature measurements to be acquired as close as 6 mm from the device. Simultaneous imaging and rotational motion was also possible during treatment using a motor based on piezoelectric actuators. Heating experiments performed in both phantoms and in a canine model with the prototype system verified the capability to perform simultaneous MR imaging and therapy delivery with this system. Real-time control over therapy using MR temperature measurements acquired during heating can be implemented to achieve precise patterns of thermal damage within the prostate gland. The technical feasibility of using the system developed in this study for MRI-guided transurethral ultrasound therapy in a closed-bore MR imager has been demonstrated.