A new one-dimensional (1-D) inverse method for layered-earth interpretation of magnetotelluric (MT) response curves is based on the method of Schmucker (1972). It involves transforming the E over B response into a nondimensional complex logarithm response, computing the partial derivatives from a new algorithm for the logarithm response, and iteratively solving (by damped least squares) for the logarithm of the conductivity contrast between layers. Error bars for the layer conductivities are estimated by a simple application of propagation of errors assuming random and independent response errors. Backus-Gilbert type smoothing kernels are also computed in order to specify the upper and lower depth limits on the conductivity model and to examine whether the layer conductivities are locally averaged values. The kernels are found to be an important aid in model interpretation and emphasize the fact that layer conductivities are averages. The method is illustrated using artificial and real data.