A system and method for controlling an underground boring tool involves the use of one or more of a gyroscope, accelerometer, and magnetometer sensor provided in or proximate the boring tool. The location of the boring tool is detected substantially in real-time. A controller produces a control signal substantially in real-time in response to the detected boring tool location and sensed parameters of a boring tool driving apparatus. The control signal is applied to the driving apparatus to control one or both of a rate and a direction of boring tool movement along the underground path. The gyroscope, accelerometer, and magnetometers may be of a conventional design, but are preferably of a solid-state design. Telemetry data is communicated electromagnetically, optically or capacitively between the navigation sensors at the boring tool and the controller via the drill string or an above-ground tracker unit. The tracker unit may further include a re-calibration unit which communicatively cooperates with the navigation sensors to reestablish a proper heading or orientation of the boring tool if needed. The controller determines a location of the boring tool in at least two of x-, y-, and z-plane coordinates and may also determine an orientation of the boring tool in at least two of yaw, pitch, and roll. A handheld remote unit may be used by an operator to control all or a sub-set of boring system functions.