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Brain source localization accuracy in magnetoencephalography (MEG) requires accuracy in both digitizing anatomical landmarks and coregistering to anatomical magnetic resonance images (MRI). We compared the source localization accuracy and MEG-MRI coregistration accuracy of two head digitization systems - a laser scanner and the current standard electromagnetic digitization system (Polhemus) - using a calibrated phantom and human data. When compared using the calibrated phantom, surface and source localization accuracy for data acquired with the laser scanner improved over the Polhemus by 141% and 132%, respectively. Laser scan digitization reduced MEG source localization error by 1.38 mm on average. In human participants, a laser scan of the face generated a 1000-fold more points per unit time than the Polhemus head digitization. An automated surface-matching algorithm improved the accuracy of MEG-MRI coregistration over the equivalent manual procedure. Simulations showed that the laser scan coverage could be reduced to an area around the eyes only while maintaining coregistration accuracy, suggesting that acquisition time can be substantially reduced. Our results show that the laser scanner can both reduce setup time and improve localization accuracy, in comparison to the Polhemus digitization system.