In this paper, the study of combining the matched‐field method with the inverse scattering theory to study a sound source localization problem in a shallow ocean with an unknown large inclusion is continued. It is assumed that there is an unknown inclusion embedded in a shallow water waveguide. The existence of the unknown inclusion changes the propagating field greatly. Therefore, neglecting the existence of the unknown inclusion will lead to substantial mismatching in the matched‐field signal processing. To compensate for the unknown environment, a number of acoustic waves emitted from known locations are sent in, which scatter off the unidentified inclusion and are received by a hydrophone array. The cw mode structure in such a waveguide is discussed, then a method is presented to generate approximately the replica field from an acoustic source using the previously recorded information. Combining the information from these scattered waves and the signal from the target, an optimum beamforming algorithm is presented to estimate the location of the cw source. A numerical simulation using this method is presented.