In the last decade, significant progress has been made in applying passive capsule endoscopes (CE) to medical diagnostics. However, disadvantages still need to be overcome for better utilization. A major challenge is to actively control the movement of the CE and provide real-time location information. This paper proposes a magnetic tracking method for CE driven by an external magnetic field that is generated by four sets of electromagnetic coils around the CE. The tracking method is based on a magnetic sensor array. The magnetic actuation constitutes three steps. First, the driving current from each coil is obtained according to the control requirement for a certain position and orientation. Second, the magnetic field that is generated by the driving current in the tracking space is estimated according to the magnetic field model. It can also be measured by Hall-effect sensors embedded in the position system. Third, the magnetic field generated by the CE is subtracted from the total magnetic field measured by the sensors, and then the magnetic position algorithm is applied. In the experiments, the positioning error is found to be within 5.6 mm and the orientation error is under 8.5°. The proposed localization method would be used for closed-loop control of CE to achieve better and safer performance.