For pt.I see ibid., vol.5, no.6, p.529-42, 1997. This work is aimed at developing a design for the use of a microphone array with binaural hearing aids. The goal of such a hearing aid is to provide both the spatial-filtering benefits of the array and the natural benefits to sound localization ability and speech intelligibility that result from binaural listening. The present study examines a design in which two ear-level omnidirectional microphones constitute the array. The merging of array processing with binaural listening is accomplished by dividing the frequency spectrum, devoting the lowpass part to binaural processing and the highpass part to adaptive array processing. Acoustic and behavioral measurements were made in an anechoic chamber and in a moderately reverberant room to assess the trade-off between sound localization and speech reception as the cutoff frequency was varied. A lowpass/highpass cutoff frequency of 500 Hz provided an improvement of 40 percentage points in sentence intelligibility over unaided listening for normal-hearing listeners, while still allowing adequate localization performance. Comparison of this binaural adaptive system to traditional amplification configurations with normal-hearing listeners showed improvements in speech reception in noise in a mildly reverberant room of approximately 3 dB over simple binaural amplification and 5 dB over monaural amplification.