Method and apparatus for real-time, 3-D image guidance of invasive surgical diagnostic tools and therapy. In this method, the 3-D distribution of electrical conductivity of the surgical region of interest are derived using images derived from magnetic resonance imaging (MRI) X-Ray Computed Tomography (CT) or other techniques. Current flows and voltages within the region due to applied currents from body surface electrodes at defined locations are simulated using a finite element method. During the surgical procedure, electrodes are placed at the same locations, and the surgical instrument is inserted into the region. By matching the potentials measured by the instrument to the simulated potentials, the instrument location may be identified in real-time.