Coordinated sensory and motor system activity leads to efficient localization behaviours; but what neural dynamics enable object tracking and what are the underlying coding principles? Here we show that optimized distance estimation from motion-sensitive neurons underlies object tracking performance in weakly electric fish. First, a relationship is presented for determining the distance that maximizes the Fisher information of a neuron's response to object motion. When applied to our data, the theory correctly predicts the distance chosen by an electric fish engaged in a tracking behaviour, which is associated with a bifurcation between tonic and burst modes of spiking. Although object distance, size and velocity alter the neural response, the location of the Fisher information maximum remains invariant, demonstrating that the circuitry must actively adapt to maintain 'focus' during relative motion.