Previous work on the simultaneous inversion method has been improved and extended to incorporate iterative solution for earthquake locations and laterally heterogeneous structure. Approximate ray tracing and parameter separation are important elements of the improved method. Application of the method of P wave arrival time data recorded by stations of the U. S. Geological Survey Central California Network yields a three-dimensional model for the velocity structure of the upper crust in an area encompassing the rupture zone of the Coyote Lake earthquake of August 1979. Very strong correlations between the velocity model and geology and magnetic anomalies are observed. Improved estimates of the locations of earthquakes in the study area are also determined. The relocation of explosions indicates epicentral accuracies of the order of a kilometer or better. Based on the revised hypocentral locations, it is concluded that the San Andreas fault is vertical in this area, with no actual offsset between the epicenters and the fault trace. In contrast, the Calaveras has two (or more) active fault surfaces one nearly vertical and another dipping 75¿ to the northeast.