A system and method for externalizing sound. The system includes a headphone assembly and a localizer configured to collect information related to a location of the user and of an acoustically reflective surface in the environment. A controller is configured to determine a location of at least one virtual sound source, and generate head related transfer functions that simulate characteristics of sound from the virtual sound source directly to the user and to the user via a reflection by the reflective surface. A signal processing assembly is configured to create one or more output signals by filtering the sound signal respectively with the HRTFs. Each speaker of the headphone assembly is configured to produce sound in accordance with the output signal.