In this study, an image processing based indoor positioning system (IPS) scheme is presented. Real-time image of uniquely coded passive reflective tags which are illuminated by an infrared projector is used to calculate the instantaneous position of an object. The system simultaneously provides real-time position data and identifies unregistered tags and makes it possible to use these tags in later frames. The ideal state of the method is to determine the position using the tags with known locations. However, for ease of installation, known tags are placed only at certain reference points and positions of the remaining tags are calculated by applying a proposed auto-registration procedure. Such an approach provides a high level of ease of installation to the presented method. The satisfactory positioning accuracy level obtained in the experimental results also enables the proposed method to be evaluated as a powerful indoor positioning system.