A method (called binaural enhancement) for enhancing interaural level differences at low frequencies, based on estimates of interaural time differences, was developed and evaluated. Five conditions were compared, all using simulated hearing-aid processing: (1) Linear amplification with frequency-response shaping; (2) binaural enhancement combined with linear amplification and frequency-response shaping; (3) slow-acting four-channel amplitude compression with independent compression at the two ears (AGC4CH); (4) binaural enhancement combined with four-channel compression (BE-AGC4CH); and (5) four-channel compression but with the compression gains synchronized across ears. Ten hearing-impaired listeners were tested, and gains and compression ratios for each listener were set to match targets prescribed by the CAM2 fitting method. Stimuli were presented via headphones, using virtualization methods to simulate listening in a moderately reverberant room. The intelligibility of speech at ±60° azimuth in the presence of competing speech on the opposite side of the head at ±60° azimuth was not affected by the binaural enhancement processing. Sound localization was significantly better for condition BE-AGC4CH than for condition AGC4CH for a sentence, but not for broadband noise, lowpass noise, or lowpass amplitude-modulated noise. The results suggest that the binaural enhancement processing can improve localization for sounds with distinct envelope fluctuations.