Although virtual audio displays are capable of realistically simulating relatively distant sound sources, they are not yet able to accurately reproduce the spatial auditory cues that occur when sound sources are located near the listener's head. Researchers have long recognized that the binaural difference cues that dominate auditory localization are independent of distance beyond 1 m but change systematically with distance when the source approaches with in 1 m of the listener's head. Recent research has shown that listeners are able to use these binaural cues to determine the distances of nearby sound sources. However, technical challenges in the collection and processing of near-field head-related transfer functions (HRTFs) have thus far prevented the construction of a fully functional near-field audio display. This paper summarizes the current state of research in the localization of nearby sound sources and outlines the technical challenges involved in the creation of a near-field virtual audio display. The potential applications of near-field displays in immersive virtual environments and multimodal interfaces are also discussed.