Measured- and simulated-pulse shapes in electrically segmented coaxial Ge detectors have been investigated. Three-dimensional position sensitivities have been determined experimentally and theoretically in a 36-fold segmented Ge detector. By using the two-dimensional segmentation in conjunction with pulse-shape analysis, a position sensitivity of better than 1 mm can be obtained in three dimensions at an energy of 374 keV. This is achieved by analyzing the shape of net charge signals of segments containing interactions and of transient image charge signals of neighboring segments. The ability to locate interactions in three-dimensions is one of the crucial properties in the proposed gamma-ray energy tracking array (GRETA). The concept of gamma-ray tracking will not only increase the efficiency in detecting gamma radiation but also enables the localization and characterization of unknown gamma-ray sources with much higher accuracy than is possible with current instruments, (C) 2000 Elsevier Science B.V. All rights reserved.