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This paper discusses about the variation of signal strength due to the presence of obstacles in indoor environment. An experimental analysis of impact of various obstacles on ZigBee RF signal strength has been done. The results obtained by the analysis have been used to locate a user inside a smart home. The parameters like Received Signal Strength (RSSI), Link Quality Indication (LQI) and Packet Error Rate (PER) have been measured and analyzed. The location of the user is an important context, based on which various controls and services can be rendered. The objective of finding out the location is to provide various services and controls like location based luminance, personalized Heating Ventilation and Air Conditioning (HVAC) control systems. It was observed that the location accuracy was improved when the number of reference nodes was increased. In future location accuracy will be improved by combining ZigBee RSSI with GSM CellID and also by using better signal processing algorithms.