Processing electromagnetic induction signals from subsurface targets, for purposes of discrimination, requires accurate physical models. To date, successful approaches for on-land cases have entailed advanced modeling of responses by the targets themselves, with quite adequate treatment of instruments as well. Responses from the environment were typically slight and/or were treated very simply. When objects are immersed in saline solutions, however, more sophisticated modeling of the diffusive EMI physics in the environment is required. One needs to account for the response of the environment itself as well as the environment’s frequency and time-dependent effects on both primary and secondary fields, from sensors and targets, respectively. Here we explicate the requisite physics and identify its effects quantitatively via analytical, numerical, and experimental investigations. Results provide a path for addressing the quandaries posed by previous underwater measurements and indicate how the environmental physics may be included in more successful processing.