The perceived lateral position of narrow-band noise (NBN) was studied in a graphic pointer task as a function of the method of compensation for interaural threshold asymmetries in hearing-impaired and normal-hearing subjects. The method of compensation consisted of equal sensation level (EqSL) or equal sound-pressure level (EqSPL) at the two ears within the same subject. The NBN signals were presented at 11 center frequencies with interaural intensity differences (IIDs) that varied from -20 to +20 dB. When equalizing by SL, the perceived lateral position is essentially linearly dependent on the degree and direction of asymmetry in asymmetric normal-hearing and hearing-impaired listeners. Equalizing by SPL shows no such dependency but produces images that are lateralized close to the midline. These results reveal that subjects may have adapted to their threshold asymmetries. These results will be discussed in terms of the fitting of binaural hearing aids.