The influence of head tissue conductivity on magnetoencephalography (MEG) was investigated by comparing the normal component of the magnetic field calculated at 61 detectors and the localization accuracy of realistic head finite element method (FEM) models using dipolar sources and containing altered scalp, skull, cerebrospinal fluid, gray, and white matter conductivities to the results obtained using a FEM realistic head model with the same dipolar sources but containing published baseline conductivity values. In the models containing altered conductivity values, the tissue conductivity values were varied, one at a time, between 10% and 200% of their baseline values, and then varied simultaneously. Although changes in conductivity values for a single tissue layer often altered the calculated magnetic field and source localization accuracy only slightly, varying multiple conductivity layers simultaneously caused significant discrepancies in calculated results. The conductivity of scalp, and to a lesser extent that of white and gray matter, appears especially influential in determining the magnetic field. Comparing the results obtained from models containing the baseline conductivity values to the results obtained using other published conductivity values suggests that inaccuracies can occur depending upon which tissue conductivity values are employed. We show the importance of accurate head tissue conductivities for MEG source localization in human brain, especially for deep dipole sources or when an accuracy greater than 1.4 cm is needed.