The basis of a three-dimensional (3D) ultrasound imaging system was constructed from a commercially available magnetometer-based position and orientation measurement (POM) device, a standard B-Mode ultrasound instrument and a personal computer. To evaluate the system's performance, a novel method was devised using an iterative, least-squares technique to simultaneously determine the system's calibration parameters and measure its precision in locating points in three-dimensional space. When tested separately, the POM system located single points with a root mean squared (RMS) uncertainty of from 1.4 mm to 3.2 mm over the 610 mm working radius of the system. When combined with the ultrasound instrument, the RMS uncertainty in locating point targets varied from 2.1 mm to 3.5 mm. These results establish the lower limits of variability to be expected from this system when locating fiducial anatomical landmarks for repeated examinations of the same region of the body, and when making numerical 3D reconstructions from multiple planar images.