To this day it is widely accepted that localization of sounds in auditory space is determined primarily by two cues, interaural differences in stimulus intensity and time of arrival. However, recent research forces us to appreciate the deficiencies of this point of view. It cannot, for example, explain localization in the median plane or localization with one ear, both of which are done with reasonable accuracy. Nor can it account for the fact that stimuli presented (over headphones) only with interaural differences, appear to originate from inside the listener's head. Acoustic measurements (ours and others) show that in addition to interaural time and intensity differences, stimuli in free space produce large direction‐dependent spectral cues, resulting from the acoustic filtering action of outer‐ear structures (pinnae, etc.). These cues are large, and occur in relatively low‐frequency regions (below 5 kHz), even when the source is moved a small amount in the horizontal plane. When stimuli are computer synthesized such that both the spectral and interaural difference cues are preserved, headphone presentation produces a nearly perfect simulation of free‐field listening. Results from several recent experiments conducted in our laboratory and elsewhere lead us to the conclusion that the filtering action of the outer ear is at least as important to our perception of auditory space as is the fact that we listen with two ears [Work supported by NSF.]