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Three-axis generation and sensing of quasi-static magneticdipole fields provide information sufficient to determine both the position and orientation of the sensor relative to the source. Linear rotation transformations based upon the previous measurements are applied to both the source excitation and sensor output vectors, yielding quantities that are linearly propotional to small changes in the position and orientation. Changes are separated using linear combinations of sensor output vectors, transformed to the desired coordinate frame, and used to update the previous measurements. Practical considerations for a head-tracking application are discussed.