This paper presents a compact and low-cost on-chip sensor and readout circuit. The sensor achieves high-resolution 5-degrees-of-freedom (DoF) tracking (x, y, z, yaw, and pitch). With the help of an external wire wound sensor, it can also achieve high-resolution 6-degrees-of-freedom (DoF) tracking (x, y, z, yaw, pitch, and roll angles). The sensor uses low-frequency magnetic fields to detect the position and orientation of instruments, providing a viable alternative to using X-rays in image-guided surgery. To measure the local magnetic field, a highly miniaturised on-chip magnetic sensor capable of sensing the magnetic field has been developed incorporating an on-chip magnetic sensor coil, analog-front end, continuous-time ∆Σ analog-to-digital converter (ADC), LVDS transmitter, bandgap reference, and voltage regulator. The microchip is fabricated using 65 nm CMOS technology and occupies an area of 1.06 mm 2, the smallest reported among similar designs to the best of our knowledge. The 5-DoF system accurately navigates with a precision of 1.1 mm within the volume-of-interest (VOI) of 15 ×15 ×15 cm 3. The 6-DoF system achieves a navigation accuracy of 0.8 mm and an angular error of 1.1 degrees in the same VOI. These results were obtained at a 20 Hz update rate in benchtop characterisation. The prototype sensor demonstrates accurate position tracking in real-life pre-clinical in-vivo settings within the porcine lung of a live swine, achieving a reported worst-case registration accuracy of 5.8 mm.