This paper presents a new 3-D ray-tracing technique based on image theory. The proposed method can be applied to urban microcellular environments with arbitrary building layouts and heights. A new hybrid method combining the uniform geometrical theory of diffraction (UTD) with the near-field ray calculation method is also proposed in order to determine the diffraction loss due to propagation over buildings. Prediction results are in good agreement with measurements. (C) 1999 John Wiley & Sons, Inc.