We are developing an augmented reality (AR) image guidance system in which information derived from medical images is overlaid onto a video view of the patient. The centerpiece of the system is a head-mounted display custom fitted with two miniature color video cameras that capture the stereo view of the scene. Medical graphics is overlaid onto the video view and appears firmly anchored in the scene, without perceivable time lag or jitter. We have been testing the system for different clinical applications. In this paper we discuss minimally invasive thoracoscopic spine surgery as a promising new orthopedic application. In the standard approach, the thoracoscope - a rigid endoscope - provides visual feedback for the minimally invasive procedure of removing a damaged disc and fusing the two neighboring vertebrae. The navigation challenges are twofold. From a global perspective, the correct vertebrae on the spine have to be located with the inserted instruments. From a local perspective, the actual spine procedure has to be performed precisely. Visual feedback from the thoracoscope provides only limited support for both of these tasks. In the augmented reality approach, we give the surgeon additional anatomical context for the navigation. Before the surgery, we derive a model of the patient's anatomy from a CT scan, and during surgery we track the location of the surgical instruments in relation to patient and model. With this information, we can help the surgeon in both the global and local navigation, providing a global map and 3D information beyond the local 2D view of the thoracoscope. Augmented reality visualization is a particularly intuitive method of displaying this information to the surgeon. To adapt our augmented reality system to this application, we had to add an external optical tracking system, which works now in combination with our head-mounted tracking camera. The surgeon's feedback to the initial phantom experiments is very positive.