A system for detecting, localizing and targeting a medical instrument toward a target tissue within the body using an optical contrast agent in which a light source (102) is optically coupled to the tissue to be diagnosed (135), a light detector (174) is optically coupled to the tissue to detect a portion of the light which passes through the tissue, and either one or both of the light source and light detector are coupled to a medical instrument (130) used in a medical procedure. A contrast locator engine (184) receives a signal from the detector and provides an target tissue output signal (195) based upon the localization and distribution of the contrast agent, allowing the target tissue to be detected, located, or imaged, and for the medical instrument to positioned or targeted relative to the target tissue, and for allowing the accuracy of placement or the progress of a procedure to be assessed in real time. A method for the system is also described.