Presently used surveying sensors in directional drilling processes include accelerometers and magnetometers arranged in three orthogonal directions. The magnetometers in these setups are negatively affected by external magnetic interferences induced by various sources. Therefore, expensive, heavy and lengthy protective nonmagnetic collars need to be installed. Fiber-optic gyroscopes (FOGs) in an inertial navigation setup have been proposed as an alternative to magnetometer-based downhole surveying. The present study explored the feasibility of utilizing a FOG-based tactical-grade inertial measurement unit (IMU) as a complete surveying sensor for measurement-while-drilling (MWD) processes downhole. Alignment and real-time navigation under laboratory conditions were demonstrated. Analysis of vibrations and temperature as possible factors limiting the accuracy of the navigation process was performed. Severe vibration effects were reduced using software techniques, and a shock-absorbing housing was suggested. The temperature range of the IMU is limited by the optical components of the device, but dynamic temperature changes within this range did not present a major problem. A downhole sub design demonstrated that the actual integration of the IMU requires only minor changes in the presently used drilling tools. The utilization of a tactical-grade IMU eliminates the necessity of nonmagnetic collars, which results in lower costs and improved accuracy.