PURPOSE: An electromagnetic navigation system for tumor excision in breast conserving surgery has recently been developed. Preoperatively, a hooked needle is positioned in the tumor and the tumor boundaries are defined in the needle coordinate system. The needle is tracked electromagnetically throughout the procedure to localize the tumor. However, the needle may move and the tissue may deform, leading to errors in maintaining a correct excision boundary. It is imperative to quantify these errors so the surgeon can choose an appropriate resection margin. <p> </p>METHODS: A commercial breast biopsy phantom with several inclusions was used. Location and shape of a lesion before and after mechanical deformation were determined using 3D ultrasound volumes. Tumor location and shape were estimated from initial contours and tracking data. The difference in estimated and actual location and shape of the lesion after deformation was quantified using the Hausdorff distance. Data collection and analysis were done using our 3D Slicer software application and PLUS toolkit. <p> </p>RESULTS: The deformation of the breast resulted in 3.72 mm (STD 0.67 mm) average boundary displacement for an isoelastic lesion and 3.88 mm (STD 0.43 mm) for a hyperelastic lesion. The difference between the actual and estimated tracked tumor boundary was 0.88 mm (STD 0.20 mm) for the isoelastic and 1.78 mm (STD 0.18 mm) for the hyperelastic lesion. <p> </p>CONCLUSION: The average lesion boundary tracking error was below 2mm, which is clinically acceptable. We suspect that stiffness of the phantom tissue affected the error measurements. Results will be validated in patient studies.