A loudness enhancement system and method is described that increases the loudness of an audio signal being played back by an audio device that places limits on the dynamic range of the audio signal. In an embodiment, the loudness enhancement system and method compresses the audio signal to an adaptively-determined compression limit that is greater than or equal to a maximum desired output level and then applies an adaptively-determined degree of soft clipping to the compressed audio signal. The compression limit and degree of soft clipping may be determined based on an overload measure that is calculated for successive portions of the audio signal. The loudness enhancement system and method advantageously operates in a manner that generates less distortion than the method of simply over-driving the audio signal such that hard-clipping occurs.