An RFID system and method for communicating between a host computer, one or more interrogators connected to the host computer (100), and a large body of transponders (150) distributed within an area covered by the interrogators (190). Each transponder originally has a common identification code, and upon initialization by the host computer internally generates a unique identification code based upon an internally generated random number. The host, through the interrogators, reads each of the identification codes associated with each transponder by iteratively transmitting a read identification code command along with a controlled variable. Each transponder compares the received controlled variable to an internally generated random number, and selectively transmits its identification code based upon the outcome of this comparison. After the completion of each read identification code iteration, the host adjusts the controlled variable based upon the responses received in the previous iteration. Preferably, communications between the interrogators and the transponders are DSSS signals in TDMA format, and the transponders use the random number generator to assign a time slot for transmission of their response. Each interrogator includes an antenna system utilizing a switch matrix to connect multiple antennas having different polarizations, which ensures that all transponders within the range of the interrogator receive the signals from the interrogator. In a further aspect, the interrogators are arranged in groups, each group in nearest neighbor format, to reduce the time for reading the transponders and the emissions generated when more than one interrogator is active at the same time.