We describe in this paper our experience of developing a large-scale, highly distributed multi-agent system using wireless-networked sensors. We provide solutions to the problems of localization (position estimation) and dynamic, real-time mobile object tracking, which we call PET problems for short, using wireless sensor networks. We propose system architectures and a set of distributed algorithms for organizing and scheduling cooperative computation in distributed environments, as well as distributed algorithms for localization and real-time object tracking. Based on these distributed algorithms, we develop and implement a hardware system and software simulator for the PET problems. Finally, we present some experimental results on distance measurement accuracy using radio signal strengths of the wireless sensors and discuss future work.