We present a surgical guidance system that incorporates pre-operative image information (e.g., MRI) with intraoperative ultrasound (US) imaging to detect and correct for brain tissue deformation during image-guided neurosurgery (IGNS). Many interactive IGNS implementations employ pre-operative images as a guide to the surgeons throughout the procedure. However, when a craniotomy is involved, tissue movement during a procedure can be a significant source of error in these systems. By incorporating intraoperative US imaging, the target volume can be scanned at any time, and two-dimensional US images may be compared directly to the corresponding slice from the pre-operative image. Homologous points may be mapped from the intraoperative to the pre-operative image space with an accuracy of better than 2 mm, enabling the surgeon to use this information to assess the accuracy of the guidance system along with the progress of the procedure (e.g., extent of lesion removal) at any time during the operation. Anatomical features may be identified on both the pre-operative and intraoperative images and used to generate a deformation map, which can be used to warp the pre-operative image to match the intraoperative US image. System validation is achieved using a deformable multi-modality imaging phantom, and preliminary clinical results are presented.