The physical process of current collection by a bare wire electrodynamic tether in space is considered. The study uses an improved model that takes into account the resistance of the wire and the magnetic shielding induced by current flow in the tether. The plasma density, ne, electron temperature, Te, tether length, L, tether radius, rw, and the angle of the geomagnetic field to the tether (90¿-&agr;) were all used as parameters. It is shown, for certain tether configurations and parameter values, that magnetic shielding reduces the collected current. In general, any parametric change that increases tether current, and hence, the strength of the current-induced magnetic field relative to the strength of the electric field between the tether and the ambient plasma, will increase the shielding effect. Tether current is increased directly with tether collection area (which depends on L and rw), plasma conductivity (which depends on ne and Te), and the motional emf along the tether (which increases with L and the angle 90¿-&agr;). It turns out that, as any of these parameters change so as to cause the overall tether current to increase, the overestimate of current that results from ignoring the magnetic shielding effect becomes correspondingly greater. Moreover, it is shown that a tether system in the thruster (or motor) mode suffers greater current reduction from magnetic shielding than does the same tether deployed in the generator mode. Finally, it is shown that, for certain tether system configurations combined with particular values of the governing plasma parameters, current-induced magnetic shielding can significantly reduce the collected current and, therefore, system efficiency. For example, in the case of an electrodynamic tether system in the thruster mode under conditions of ne=1.67¿106 cm-3, &agr;=60¿, rw=2.5 mm, and Em=34 V/km, magnetic shielding will reduce the collected current 10% at a point L=0.65 km along the tether (4.3 A instead of 4.8 A) and this increases to more than 40% at L=1.3 km (9.6 A instead of 13.4 A). ¿ 2001 American Geophysical Union