Electromagnetic 3D stylus

A stylus system and method for determining the three-dimensional position and orientation of a stylus operating within a volume located above a surface of a display device is described. In some embodiments, the stylus system includes a stylus and a display device. The stylus senses one or more magnetic fields generated from a set of transmitting coils associated with the display device and transmits sensing information over an RF channel to a receiver in the display device. The display device determines the three-dimensional position of the stylus by applying a cell-based position reconstruction technique that compares the received sensing information with predetermined magnetic field values associated with one or more predetermined regions located above the surface of the display device. The cell-based position reconstruction technique accommodates magnetic field distortions due to the presence of conductive elements within or near the display device.