We extended a system for augmented reality visualization to include the capability for instrument tracking. The original system is based on a video-see-through head-mounted display and features single-camera tracking. The tracking camera is head-mounted, rigidly fixed to a stereo pair of cameras that provide a live video view of a workspace. The tracker camera includes an infrared illuminator and works in conjunction with a set of retroreflective markers that are placed around the workspace. This marker frame configuration delivers excellent pose information for a stable overlay of graphics onto the video images. Using the single camera also for instrument tracking with relatively small marker clusters, however, encounters problems of marker identification and of noise in the pose data. We present a multilevel planar marker design, which we used to build a needle placement phantom. In this phantom, we achieved a stable augmentation; the user can see the location of the hidden target and the needle without perceptible jitter of the overlaid graphics. Piercing the needle through a foam window and hitting the target is then intuitive and comfortable. Over a hundred users have tested the system, and are consistently able to correctly place the needle on the 6mm target without prior training.