This paper suggests the next-generation audio system for ultra high definition digital TV in terms of loudspeaker layout and corresponding rendering method. First part introduces the listening test results of perceived audio quality with several loudspeaker arrangements in order to find the optimal configuration of loudspeakers for a next-generation multichannel sound system. The subjective evaluations focused on the loudspeaker configurations at the top layer were carried out with test materials by mixing in studio and from B-format recordings. The results show that the perceptual difference in the overall quality achieved with the new 10.2-channel vertical surround system with 3 top loudspeakers and the reference system was imperceptible. Second part presents the virtual elevation effect rendering algorithm which can give a listener an impression of virtual 10.2 channel speakers using the conventional 7.1 channel speaker system (ITU-R BS.775-2) placed in horizontal plane. The proposed virtual height speaker rendering method consists of a generic head-related transfer function (HRTF) and a mixing algorithm based on four loudspeakers. For subjective evaluation three kinds of playbacks were compared; Original 10.2 channel signals, proposed 7.1 channel signals, and down-mixed 7.1 channel signals.