The goal of this research is to create and evaluate a model of the process by which people locate sounds in three dimensions. Emphasis will be placed on explaining well established but still incompletely understood psycho-acoustical phenomena. One example is our ability to locate sounds coming from above or below, despite the fact that there are no binaural differences between the sounds that reach the ears. Another example is our ability to locate sounds in reverberant environments that contain multiple sound sources, where echoes and reflections act as additional, virtual sources. A third example is our ability to judge distance, since loudness alone is not an adequate cue. The model is based on the physical effects of sound propagation, and on neurophysiological studies that have traced the auditory cortex. It extends an existing computational model of the cochlea by incorporating monaural and binaural, temporally-based correlation methods to extract the information needed for source localization. If successful, this work should significantly improve the abilities of computers to recognize speech or other sounds as they occur in everyday, multisource environments, thereby extending the range of effective human-machine interaction.