We present a novel approach to MEG source estimation based on a regularized first-order multipole solution. The Gaussian regularizing prior is obtained by calculation of the sample mean and covariance matrix for the equivalent moments of realistic simulated cortical activity. We compare the regularized multipole localization framework to the classical dipole and general multipole source estimation methods by evaluating the ability of all three solutions to localize the centroids of physiologically plausible patches of activity simulated on the surface of a human cerebral cortex. The results, obtained with a realistic sensor configuration, a spherical head model, and given in terms of field and localization error, depict the performance of the dipolar and multipolar models as a function of variable source surface area (50-500 mm(2)), noise conditions (20, 10, and 5 dB SNR), source orientation (0-90 degrees ), and source depth (3-11 cm). We show that as the sources increase in size, they become less accurately modeled as current dipoles. The regularized multipole systematically outperforms the single dipole model, increasingly so as the spatial extent of the sources increases. In addition, our simulations demonstrate that as the orientation of the sources becomes more radial, dipole localization accuracy decreases substantially, while the performance of the regularized multipole model is far less sensitive to orientation and even succeeds in localizing quasi-radial source configurations. Furthermore, our results show that the multipole model is able to localize superficial sources with higher accuracy than the current dipole. These results indicate that the regularized multipole solution may be an attractive alternative to current-dipole-based source estimation methods in MEG.