An engineered artificial lateral-line system has been recently developed, consisting of a 16-element array of finely spaced MEMS hot-wire flow sensors. This represents a new class of underwater flow sensing instruments and necessitates the development of rapid, efficient, and robust signal processing algorithms. In this paper, we report on the development and implementation of a set of algorithms that assist in the localization and tracking of vibrational dipole sources underwater. Using these algorithms, accurate tracking of the trajectory of a moving dipole source has been demonstrated successfully.