As part of the effort to develop techniques for understanding environments using sound, many studies in the field of computational auditory scene analysis have focused on using computers to perform functions carried out naturally by the human auditory system. Thanks to recent progress in machine‐learning techniques, these environmental sound‐processing techniques have significantly improved and a widening variety of applications has resulted in considerable interest in this field. In this review, we introduce the fundamental techniques of environmental sound processing, as well as recent advances in front‐end and back‐end processing and potential applications for these techniques. Prospects for further progress in the field of environmental sound processing and the challenges still to be overcome are also discussed. © 2019 Institute of Electrical Engineers of Japan. Published by John Wiley & Sons, Inc.