This paper discusses recent progress by the Three-dimensional Ultrasound Imaging Group at The University of California, San Diego in developing a cost-effective 3D ultrasound system integrating clinical scanners and graphics workstations. We discuss the design features of an interactive system for acquiring, analyzing and displaying volume sonographic patient data incorporating stereoscopic viewing and initial clinical experience working with volume data in an interactive environment. We have developed an intuitive, easy-to-use interface with a rapid learning curve that facilitates physician operation of a system incorporating an interactive volume renderer permitting optimization of viewing orientation and data presentation. Target organ visualization is further enhanced using a 3D electronic scalpel we have developed to interactively extract tissues or organs of interest from the rest of the volume scanned. Incorporation of interactive stereo viewing with all studies has proven essential to improve user comprehension of complex anatomic structures.