A recent development in human-computer interfaces is the virtual acoustic display, a device that synthesizes three-dimensional, spatial auditory information over headphones using digital filters constructed from head-related transfer functions (HRTFs). The utility of such a display depends on the accuracy with which listeners can localize virtual sound sources. A previous study [F. L. Wightman and D. J. Kistler, J. Acoust. Soc. Am. 85, 868-878 (1989)] observed accurate localization by listeners for free-field sources and for virtual sources generated from the subjects' own HRTFs. In practice, measurement of the HRTFs of each potential user of a spatial auditory display may not be feasible. Thus, a critical research question is whether listeners can obtain adequate localization cues from stimuli based on nonindividualized transforms. Here, inexperienced listeners judged the apparent direction (azimuth and elevation) of wideband noisebursts presented in the free-field or over headphones; headphone stimuli were synthesized using HRTFs from a representative subject of Wightman and Kistler. When confusions were resolved, localization of virtual sources was quite accurate and comparable to the free-field sources for 12 of the 16 subjects. Of the remaining subjects, 2 showed poor elevation accuracy in both stimulus conditions, and 2 showed degraded elevation accuracy with virtual sources. Many of the listeners also showed high rates of front-back and up-down confusions that increased significantly for virtual sources compared to the free-field stimuli. These data suggest that while the interaural cues to horizontal location are robust, the spectral cues considered important for resolving location along a particular cone-of-confusion are distorted by a synthesis process that uses nonindividualized HRTFs.