In this study, we have created a virtual three-dimensional conductivity model of the Gediz Graben geothermal area using real topographical variations and geological settings as prelude to the interpretation of acquired MT field data. The thicknesses of the geological units were obtained from previously studied seismic sections and boreholes drilled inside the study area. A large magnetotelluric grid was created using 234 sites with 1 km spacing between each site. The three-dimensional magnetotelluric response of the model was calculated at each site and used as an input for two- and three-dimensional inversion to assess resolving capability for subsurface features. The inversion results were compared to the virtual graben model, and the efficiency of the inversion methods was examined. Comparisons show that the three-dimensional inversion of magnetotelluric data has many advantages with respect to the two-dimensional inversion results for the interpretation of the three-dimensional geological structure of the graben fill. Although the two-dimensional inversion is a rapid tool for exploration of the conductive anomalies, it is inadequate for interpreting the resistive basement rock structure under the sedimentary cover. We also applied three-dimensional inversion to the field data previously recorded inside the study area. The target borehole locations were defined according to the interpretation of the three-dimensional inversion model. A resistivity cross-section extracted from the three-dimensional model of the field data is presented with the borehole observations. The lithological boundaries of the actual borehole data and the resistivity transactions of the three-dimensional model show close correlation. The synthetic data examples show that the virtual graben model is a practical tool for understanding the advantages and disadvantages of the magnetotelluric inversion methods on extensional tectonic basins. Additionally, the field data experiments show that the three-dimensional inversion of magnetotelluric data is an efficient tool for interpreting the geological structure of extensional graben systems. (C) 2016 Elsevier Ltd. All rights reserved.