This paper presents an efficient localization scheme for an indoor mobile robot using RFID tags on the floor. The mobile robot carries an RFID reader at the bottom, which reads the RFID tags on the floor to localize the mobile robot. Each RFID tar on the floor stores its own absolute position which is used to calculate the position and velocity of the mobile robot. Locating the RFID tags on the floor, which constructs an intelligent sensor space, may require several factors to be considered: economics feasibility and accuracy. In this paper, the optimal allocation scheme of the RFID tags on the floor to satisfy the accuracy constraint has been proposed and verified by the experiments. Based on the RFID reading, the mobile robot navigation has been successfully demonstrated to avoid obstacles and to reach the goal within a pre-specified time.