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This paper presents a real-time magnetic tracking system to be used for tracking an endofunctional capsule intended to aid in the delivery of biomarkers to specific areas in the gastrointestinal (GI) tract. Magnetic technology is chosen due to its significant advantages over others like RF and Ultrasonics. The tracking system is designed to be used with eight magnetic sensors making it less complex than the other proposed systems. The paper describes a new mathematical model which is more accurate than the existing ones, a linear tracking algorithm and system's performance evaluation for three sensor configurations. The algorithm copes with the problem of magnetic field strength drop due to varying orientation of magnet. The minimum average error obtained is 1.37cm/6.85% in a 20×20×20 cm3 volume for two dimensional sensor configuration.