In this work we tackled the problem of accurate measurement of internal–external (IE) rotations in the prosthetic knee. We presented a magnetic measurement system to be implanted in the knee prostheses in order to measure IE without soft tissue artifacts. The measurement system consisted of a permanent magnet attached under the tibial plate of the prosthesis and a combination of magnetic sensors in the polyethylene insert. Two different sensor configurations were designed, and five different angle estimators for measurement of IE angles were defined and tested based on several static and dynamic measurements toward a stereophotogrammetry motion capture system. Also a noise analysis was done to see which estimators are less sensitive to measurement noise. One-sensor configuration provided lower power budget with dynamic RMS error of 0.49° and a noise range of ±0.53°. Two-sensor configuration doubles the power consumption but provided slightly lower dynamic RMS error (0.37°) and a noise range of ±0.42°, and offers the possibility of having redundancy in case of damaged sensor.