As an initial step in the diagnostic process, human neurologists often use anatomical localization to constrain the set of diagnostic hypotheses deserving further consideration. We describe an automated system, INKBLOT-1, which uses anatomical localization in much the same way as human neurologists. Given a set of manifestations, INKBLOT-1 generates a set of hypothetical localizations relative to a coordinate system of nested cubes and then uses these localization(s) to explain the manifestations. We trace the reasoning mechanism utilized by INKBLOT-1 for a particular set of symptoms and show how INKBLOT-1 is able to generate novel hypotheses that explain the observed manifestations. In doing this, INKBLOT-1 demonstrates capabilities not demonstrated by previously described systems.