The sound-source localization provided by a crosstalk cancellation (CTC) system depends on the head-related transfer functions (HRTFs) used for the CTC filter calculation. In this study, the horizontal- and sagittal-plane localization performance was investigated in humans listening to individualized matched, individualized but mismatched, and non-individualized CTC systems. The systems were simulated via headphones in a binaural virtual environment with two virtual loudspeakers spatialized in front of the listener. The individualized mismatched system was based on two different sets of listener-individual HRTFs. Both sets provided similar binaural localization performance in terms of quadrant, polar, and lateral errors. The individualized matched systems provided performance similar to that from the binaural listening. For the individualized mismatched systems, the performance deteriorated, and for the non-individualized mismatched systems (based on HRTFs from other listeners), the performance deteriorated even more. The direction-dependent analysis showed that mismatch and lack of individualization yielded a substantially degraded performance for targets placed outside of the loudspeaker span and behind the listeners, showing relevance of individualized CTC systems for those targets. Further, channel separation was calculated for different frequency ranges and is discussed in the light of its use as a predictor for the localization performance provided by a CTC system.