For most animals, the crucial ability to localize sounds is associated with the placement of two ears as far apart as possible on the head or body. However, the recently discovered tympanal ears of a parasitoid fly Ormia ochracea (Diptera: Tachinidae), challenges conventional assumptions about the design principles of directional hearing organs, in both form and mechanism. The comparative morphology of closely-related, tympanate and atympanate flies points to anatomical features that are derived from the ancestral atympanate condition' and represent innovations associated with the evolution of tympanal hearing. Such innovations include the inflation of the ventral prosternum; thin and corrugated tympanal membranes; a broad proepisternal sclerite coupling the two tympana mechanically; two chordotonal sensory organs coupled to the tympana. In O. ochracea, the sensory organs are separated by only 520 µm, and are located within an undivided air sac. This morphological arrangement results in small interaural time difference and intensity cues from an incident sound wave. Using laser vibrometry and physiology, we demonstrate that this fly utilizes a mechanism for directional hearing that is fundamentally different from the pressure and pressure-difference systems previously known for animals. This new mechanism relies on mechanical pre- processing that converts interaural acoustic time differences of about 1 µs into neural time differences encodable in the central nervous system. In effect, this mechanism endows the fly with "virtual ears'', ears that would be separated by a distance about 20 times greater than the width of the fly itself.