Seabed unexploded ordnance that resulted partly from the high failure rate among munitions from more than 80 years ago and from decades of military training and testing of weapons systems poses an increasing concern all around the world. Although existing magnetic systems can detect clusters of debris, they are not able to tell whether a munition is still intact requiring special removal (e.g. in situ detonation) or is harmless scrap metal. The marine environment poses unique challenges, and transferring knowledge and approaches from land to a marine environment has not been easy and straightforward. On land, the background soil conductivity is much lower than the conductivity of the unexploded ordnance and the electromagnetic response of a target is essentially the same as that in free space. For those frequencies required for target characterization in the marine environment, the seawater response must be accounted for and removed from the measurements. The system developed for this study uses fields from three orthogonal transmitters to illuminate the target and four three-component receivers to measure the signal arranged in a configuration that inherently cancels the system's response due to the enclosing seawater, the sea–bottom interface and the air–sea interface for shallow deployments. The system was tested as a cued system on land and underwater in San Francisco Bay – it was mounted on a simple platform on top of a support structure that extended 1 m below and allowed the diver to place metal objects to a specific location even in low-visibility conditions. The measurements were stable and repeatable. Furthermore, target responses estimated from marine measurements matched those from land acquisition, confirming that the seawater and air–sea interface responses were removed successfully. Thirty-six channels of normalized induction responses were used for the classification, which was done by estimating the target principal dipole polarizabilities. Our results demonstrated that the system can resolve the intrinsic polarizabilities of the target, with clear distinctions between those of symmetric intact unexploded ordnance and irregular scrap metal. The prototype system was able to classify an object based on its size, shape and metal content and correctly estimate its location and orientation.