Successful speech perception in complex auditory scenes with multiple competing speakers requires spatial segregation of auditory streams into perceptually distinct and coherent auditory objects and focusing of attention toward the speaker of interest. Here, we focused on the neural basis of this remarkable capacity of the human auditory system and investigated the spatiotemporal sequence of neural activity within the cortical network engaged in solving the “cocktail‐party” problem. Twenty‐eight subjects localized a target word in the presence of three competing sound sources. The analysis of the ERPs revealed an anterior contralateral subcomponent of the N2 (N2ac), computed as the difference waveform for targets to the left minus targets to the right. The N2ac peaked at about 500 ms after stimulus onset, and its amplitude was correlated with better localization performance. Cortical source localization for the contrast of left versus right targets at the time of the N2ac revealed a maximum in the region around left superior frontal sulcus and frontal eye field, both of which are known to be involved in processing of auditory spatial information. In addition, a posterior‐contralateral late positive subcomponent (LPCpc) occurred at a latency of about 700 ms. Both these subcomponents are potential correlates of allocation of spatial attention to the target under cocktail‐party conditions.