Magnetotelluric response in an inhomogeneous earth having resitivity varying linearly with depth is investigated. Horizontal electric and magnetic fields in such a medium are given in terms of modified Bessel functions. Impedance and apparent resistivity are computed for (1) an inhomogeneous half-space, (2) an inhomogeneous half-space overlain by a homogeneous layer, and (3) an inhomogeneous layer as a transition zone sandwiched between two homogeneous layers. Results are presented graphically and are compared with those of Cagniard models and with homogeneous multilayer models. In the case of resistivity decreasing with depth, the results of the above inhomogeneous models are similar to that of Cagniard two-layer models, with the equivalence of hlc = hl+&rgr;l/α. In the case of resistivity increasing with depth the results of the above inhomogeneous models can not usually be fitted with Cagniard two-layer models but can be fitted with homogeneous multilayer models if the parameters of the layers are favorably chosen. The reciprocal impedance as a function of frequency is more useful than the apparent resistivity for determining the rate of increase α and the thickness hl of an overlying homogeneous layer.