Auditory localization research needs to be performed in more realistic testing environments to better capture the real-world abilities of listeners and their hearing devices. However, there are significant challenges involved in controlling the audibility of relevant target signals in realistic environments. To understand the important aspects influencing target detection in more complex environments, a reverberant room with a multi-talker background was simulated and presented to the listener in a loudspeaker-based virtual sound environment. Masked thresholds of a short speech stimulus were measured adaptively for multiple target source locations in this scenario. It was found that both distance and azimuth of the target source have a strong influence on the masked threshold. Subsequently, a functional model was applied to analyze the factors influencing target detectability. The model is comprised of an auditory front-end that generates an internal representation of the stimuli in both ears, followed by a decision device combining d ′ information across time, frequency and both ears. The model predictions of the masked thresholds were overall in very good agreement with the experimental results. An analysis of the model processes showed that head shadow effects, signal spectrum, and reverberation have a strong impact on target audibility in the given scenario.