A sound system for a vehicle includes a plurality of microphones to detect sounds emanating from outside of the vehicle. A sound processor is operable to process microphone output signals of the microphones to identify a source of at least some sounds detected by the microphones. The sound processor processes microphone output signals to identify a sound of interest outside of the vehicle, which includes at least one of (i) a siren of an emergency vehicle and (ii) a horn of another vehicle. Responsive to identification by the sound processor of the sound of interest, a plurality of speakers disposed in the cabin of the vehicle generate sound representative of the identified sound of interest. While the speakers are generating sound representative of the identified sound of interest, sounds generated by the speakers based on audio signals from other sound systems in the vehicle are diminished.