Wireless capsule endoscopy is an established medical application for the examination of the gastrointestinal tract. However, the robust and precise localization of these capsules is still in need of further scientific investigation. This paper presents an innovative differential magnetic localization method for capsule endoscopy to prevent interference caused by the geomagnetic field. The effect of changing the orientation of the capsule on the localization process was also examined. Simulations using COMSOL Multiphysics with the superimposed geomagnetic field were performed. The Levenberg–Marquardt algorithm was applied in MATLAB to estimate the position and orientation of the capsule. Comparing the proposed differential method with the absolute magnetic localization method under ideal conditions, the mean position and orientation errors were reduced by three orders in magnitude to less than 0.1 mm and 0.1 ° respectively. Even if sensor non-idealities are considered, the simulationbased results reveal that our proposed method is competitive with state-of-the-art geomagnetic compensation methods for static magnetic localization of capsule endoscopes.The achieved localization accuracy by applying the differential method is not dependent on the rotation of the localization system relative to the geomagnetic flux density under the made assumptions and the impact of the magnet orientation is neglectable. It is concluded that the proposed method is capable of preventing all interference whose components are approximately equal at all sensors with identical orientation.