We present the theoretical foundation for designing an accurate real-time, 3-D, localization system within a measurement volume. As an example, we investigate localizing a tumor during radiotherapy treatment as a challenging medical application due to the physical constraints imposed by the system. We demonstrate that real-time, three-dimensional localization of an inductive tag in the body can e accomplished with a passively charged, radio frequeny transmitter and superconducting quantum interference device (SQUID) magnetometers. The overall system design consists of (1) external dipole antennas, (2) a microchip implant transmitter, and (3) SQUID magnetometers for signal detection. The transmitter is charged from external antennas where the implant IC control circuit sequentially charges and discharges. The resulting implant discharge current creates an alternating magnetic field through the inductor and is detected by a configuration of surrounding magnetometers which is then used to calculate the location of the implant transmitter. From the analysis, real-time, 3-D positioning is shown to be feasible for time scales on the order of 1 second.