Six listeners were instructed to localize manipulated random noise (200-ms duration, 20-ms cos2-ramp, 12 directions in the horizontal plane) in an auditory virtual environment using individual head-related transfer functions (HRTF). In the first condition, the left headphone channel was attenuated by 20 dB. In the second condition, an interaurally uncorrelated noise was used as the test signal by filtering two uncorrelated noises with the left and right HRTF. A second random noise was used as a distractor (500-ms duration, 20-ms cos2-ramp, 0° azimuth). The distractor was manipulated in the same way as the test signal. Four different signal-to-noise ratios (S/N): 0, −5, −7, and −10 dB (plus an unmasked condition) were tested. In condition 1, the additional level difference of 20 dB caused a lateral displacement of the auditory event in four listeners. This displacement decreased when the distractor was added. In condition 2 (uncorrelated noise), the listeners were able to estimate the left-right direction, but frequently showed front-back confusions. With decreasing S/N the perceived directions clustered at −90°, 0°, and 90° azimuth.