A new optical improvement for image-guided surgical navigation employs coded apertures to measure with submillimeter accuracy the 3D locations of surgical instruments equipped with point light sources relative to a patient. The system consists of multiple angular sensors to measure the position of each light source in several angular dimensions. Each sensor includes a coded aperture to image the light from the point source onto a linear charge-coupled device (CCD) detector array. A coded aperture consists of spatially redundant slits of various widths. This replaces the cylindrical optics or single precision slit which has been used heretofore to focus light from the point source into a linear image crossing the CCD. Although cylindrical lenses have adequate light-gathering capability and tolerate dust, off-axis focus is a major problem. A slit has excellent depth of field and focus but forms a dim image, and dust affects accuracy. A coded aperture combines the advantages of slits and lenses, but does require computing the correlation function using the wide image and a corresponding kernel. The peak in the correlation determines the angular position of the point light source. Sub-pixel accuracy is achieved by interpolation near the correlation peak. Image magnification problems are solved by sing scaled kernels.