We consider the initial-value problem for the bidirectional Whitham equation, a system which combines the full two-way dispersion relation from the incompressible Euler equations with a canonical shallow-water nonlinearity. We prove local well-posedness in classical Sobolev spaces in the localised as well as the periodic case, using a square-root type transformation to symmetrise the system. The existence theory requires a non-vanishing surface elevation, indicating that the problem is ill-posed for more general initial data.2010 Mathematics Subject Classification. 76B15; 76B03, 35S30, 35A20. Key words and phrases. Whitham-type equations, dispersive equations, well-posedness. M.E. and Y.W. acknowledge the support by grants nos. 231668 and 250070 from the Research Council of Norway. shock waves developing from initial depressions in shallow water, Phys. D, 333 (2016), pp. 276-284.