The ear apertures in the skin of Tengmalm's owl, Aegolius funereus (Linne) (Strigiformes), are slit-like and ca. 24 mm long. This equals the height of the skull. The ear opening in the skin is bounded by a continuous fold of skin that is developed into a preaural and a postaural flap. The preaural flap carries the facial disk feathers that are structurally specialized to be sound transparent. They form a multi-layered, but sparse and delicate web over the ear opening. The postaural flap carries very densely packed feathers that form an anteriorly concave facial ruff. The ear folds (flaps) and the ear slit in the skin of one ear exhibit bilateral symmetry relative to those of the other ear, but because of asymmetry of underlying skull bones the postaural folds come to be oriented in somewhat different ways in the left and right ear. The skull bones, their constellation, and their role in the bilateral skull asymmetry are described in skulls at various stages of development (12-25 days post-hatching). Inside the ear aperture in the skin lies the smaller ear aperture in the skull. This is ca. 11 mm high. The ear and skull asymmetry reaches its maximum at the ear apertures of the skull. Hence the right ear aperture of the skull lies ca. 6.5 mm higher than the left one. Viewed from in front, a line connecting the centres of the ear apertures deviates 12<latex>$^\circ$</latex> from the horizontal. The asymmetry then decreases towards the posterior parts of the external auditory meatuses, and the flattened meatus parts extended over the eardrum exhibit complete bilateral symmetry. As projected on the vertical median plane of the head, an axis through the centre of the eardrum and the centre of the ear aperture of one ear gives an angle of vertical divergence of ca. 40<latex>$^\circ$</latex> with the corresponding, projected, axis of the other ear. The tympanic ring, the eardrum, the middle ear, the stapedial complex, and the bony cochlea and semicircular canals exhibit complete bilateral symmetry. However, one pair of the three pairs of air spaces communicating with the middle ear, namely the superior air space, is of different shape on the two sides. The skull bones participating in the asymmetry are: the orbitosphenoid, squamosal, parietal, frontal, and the squamoso-occipital wing. Of the jaw muscles the M. depressor mandibulae and the aponeurosis 1 portion of M. adductor mandibulae externus exhibit pronounced bilateral asymmetry. Both muscles are related to the highly asymmetrical squamoso-occipital wings. The combined volume of the middle ear cavity and the air spaces communicating with it is ca. 730 mm<latex>$^3$</latex> in one ear. This is almost as much as the volume of the external auditory meatus, which is about 830 mm<latex>$^3$</latex>. The large volume of air inside the eardrum should result in (1) a lowering of the resonant frequency of the middle ear, and (2) a lowering of impedance in the stiffness controlled frequency region below the resonance frequency, with a corresponding increase in transmission of these frequencies to the cochlea. An ecological consequence to the owl of lowered middle ear impedance, and hence threshold of hearing at low frequencies, is an improvement of the owl's ability in far range detection of sounds containing low frequencies, such as rustling sounds made by prey moving about in vegetation. While high frequencies are potentially more useful for sound localization than low ones, low frequencies are less attenuated by air and less diffracted and reflected by vegetation, and therefore travel farther and are more useful for detection of sound at some distance. The area ratio between the eardrum and the footplate of stapes is 35.3, which is a high value for a bird. The stapedial complex consists of two functional units that perform two different, but interrelated, movement patterns. One unit is formed by the extracolumella and the Ligamentum ascendens. This unit is rigid and rotates about its axis of rotation at the rim of the tympanic ring. It is the functional equivalent to the mammalian ear ossicles malleus and incus. The other unit is the bony stapes. It performs a pistonlike motion and corresponds to the mammalian stapes. Because of the oblique orientation of the stapedial complex relative to the plane of the tympanic ring, the force lever arm becomes longer than the resistance arm. The maximum transformer ratio attainable by the stapedial complex amounts to 1.6. The combined transformer action, due to the area ratio and the transformer action of the stapedial complex, thus becomes 56 (the possible curved-membrane effect not included). The middle ear transformer ratio thus seems to be close to the optimal one (ca. 65), i.e. that resulting in maximum pressure transfer to the inner ear. The external ears are bilaterally asymmetrical in the vertical plane. This strongly suggests that the asymmetry is linked to vertical directional hearing. The mere fact that there is a bilateral asymmetry of the external ears strongly suggests that vertical directional hearing is based on binaural comparison of signals from the two ears. Indeed, the entire asymmetry would seem meaningless as to auditory localization, if the information processing at the neural level were not based on binaural comparison. It is suggested that the remarkably large height of the symmetrical ear slits in the skin serves the purpose of extending the effect of ear asymmetry to lower frequency domains. Data from acoustical measurements show that the vertical sensitivity pattern is different between the left and right ear for frequencies above 6000 Hz. This demonstrates that the ear asymmetry in Aegolius is capable of producing excellent physical cues to vertical localization of sound. A hypothesis on localization of complex noise is given; it suggests that the owl performs a binaural comparison of spectral pattern. Low frequencies (below 6000 Hz) provide intensity cues to azimuth, high frequencies intensity cues to elevation angle. In theory, the median plane ambiguity, inherent to symmetrical ears, is removed by the bilateral asymmetry. This is because the asymmetry, at some frequencies, causes interaural intensity differences at most elevation angles in the median plane. The use of interaural differences in spectral pattern in auditory localization, would remove also the problem of distinguishing 'what' from 'where', i.e. the uncertainty as to whether a specific spectral pattern should be attributed to the sound source or to a direction-dependent spectral transformation imposed by head and ear. The ear asymmetry provides the cue in the vertical plane. The hypothesis on auditory localization is summarized in a simple mathematical expression.