The recent development of real-time 3-D ultrasound (US) enables intracardiac beating-heart procedures, but the distorted appearance of surgical instruments is a major challenge to surgeons. In addition, tissue and instruments have similar gray levels in US images and the interface between instruments and tissue is poorly defined. We present an algorithm that automatically estimates instrument location in intracardiac procedures. Expert-segmented images are used to initialize the statistical distributions of blood, tissue and instruments. Voxels are labeled through an iterative expectation-maximization algorithm using information from the neighboring voxels through a smoothing kernel. Once the three classes of voxels are separated, additional neighboring information is combined with the known shape characteristics of instruments to correct for misclassifications. We analyze the major axis of segmented data through their principal components and refine the results by a watershed transform, which corrects the results at the contact between instrument and tissue. We present results on 3-D in-vitro data from a tank trial and 3-D in-vivo data from cardiac interventions on porcine beating hearts, using instruments of four types of materials. The comparison of algorithm results to expert-annotated images shows the correct segmentation and position of the instrument shaft.