A sound localization method in the proximal region is proposed, which is based on a low-cost 3D sound localization algorithm with the use of head-related transfer functions (HRTFs). The auditory parallax model is applied to the current algorithm so that more accurate HRTFs can be used for sound localization in the proximal region. In addition, head-shadowing effects based on rigid-sphere model are reproduced in the proximal region by means of a second-order IIR filter. A subjective listening test demonstrates the effectiveness of the proposed method. Embedded system implementation of the proposed method is also described claiming that the proposed method improves sound effects in the proximal region only with 5.1% increase of memory capacity and 8.3% of computational costs.