Magnetic dipole localization methods that rely on measurement of the magnetic field vector are compromised by the relatively strong background geomagnetic field. A localization method that uses only magnetic gradient tensor data is proposed. The localization equations are established by transforming Euler’s equation of degree into degree and using the orthogonality of the intermediate eigenvector of the magnetic gradient tensor that is produced by a magnetic dipole and the source-sensor displacement vector. To measure the quantities required in the localization equations, we designed a magnetic gradient tensor system in which finite differences are used to approximate the first- and second-order spatial gradients of magnetic field components. Numerical simulations show that the proposed method can accurately and uniquely solve for the location of a magnetic dipole in the presence of the geomagnetic field, and the experimental results show the superiority and the practicability of the proposed method.