The effects of monaural masking noise on loudness and on lateralization of clicks were compared for noise levels ranging between 35 and 65 dB SPL. For different fixed levels of unmasked clicks, sound‐pressure levels of the masked clicks were adjusted by the subjects to produce centered sound images. In a second experiment, similar procedures were used to generate equal‐loudness functions. For both loudness and lateralization, the effect of masking noise was greatest with high levels of noise and low intensities of click. In every case, the masking effect was greater for loudness than for lateralization.