In this paper source localization results obtained by matched‐field (MF) processing of vertical line array (VLA) data from the PACIFIC ECHO III sea trial are presented. The experimental site was located in a region of significant bathymetric variation. An harmonic source was towed on a series of arcs, providing data for a sequence of different ranges and azimuths. In spite of the significant bathymetric variation, good MF localization results were obtained for a large fraction of the trial time. In the first part of this analysis it is assumed that the azimuth of the source is known. Substantial improvements in MF localization were obtained by using an adiabatic normal mode model to calculate replica acoustic fields for the range‐dependent bathymetry. The improvement over the results obtained with flat‐bottom waveguide replicas is demonstrated for data from the longer range arcs. In the second part of the analysis, the concept of environmental signal processing, an enhancement to MF processing that is obtained by making use of the complexity of the oceanic waveguide environment, is investigated. The azimuthal variation of bathymetry for the source tracks along the arcs was used to obtain estimates of the source bearing from the VLA data. In many instances, the bearing estimates were in reasonable agreement with the known source bearings.