In an attempt to delineate the assumed 'what' and 'where' processing streams, we studied the processing of spatial sound in the human cortex by using magnetoencephalography in the passive and active recording conditions and two kinds of spatial stimuli: individually constructed, highly realistic spatial (3D) stimuli and stimuli containing interaural time difference (ITD) cues only. The auditory P1m, N1m, and P2m responses of the event-related field were found to be sensitive to the direction of sound source in the azimuthal plane. In general, the right-hemispheric responses to spatial sounds were more prominent than the left-hemispheric ones. The right-hemispheric P1m and N1m responses peaked earlier for sound sources in the contralateral than for sources in the ipsilateral hemifield and the peak amplitudes of all responses reached their maxima for contralateral sound sources. The amplitude of the right-hemispheric P2m response reflected the degree of spatiality of sound, being twice as large for the 3D than ITD stimuli. The results indicate that the right hemisphere is specialized in the processing of spatial cues in the passive recording condition. Minimum current estimate (MCE) localization revealed that temporal areas were activated both in the active and passive condition. This initial activation, taking place at around 100 ms, was followed by parietal and frontal activity at 180 and 200 ms, respectively. The latter activations, however, were specific to attentional engagement and motor responding. This suggests that parietal activation reflects active responding to a spatial sound rather than auditory spatial processing as such.