In order to explore the possibility of using two microphones for separation and locating of multiple sound sources in a two-dimensional plane, an indoor voice separation and sound source localization system based on dual-microphone was proposed. According to the signal collected by microphones, a dual-microphone time delay-attenuation model was established. Then, Degenerte Unmixing Estimation Technique (DUET) algorithm was used to estimate the delay-attenuation parameters of model, and the parameter histogram was drawn. In the speech separation stage, Binary Time-Frequency Masking (BTFM) was established. According to the parameter histogram, binary masking method was combined to separate the mixed speech. In the sound source localization stage, the mathematical equations for determining the location of sound source were obtained by deducing the relationship between the model attenuation parameters and the signal energy ratio. Roomsimove toolbox was used to simulate the indoor acoustic environment. Through Matlab simulation and geometric coordinate calculation, the locating in the two-dimensional plane was completed while separating multiple targets of sound source. The experimental results show that, the locating errors of the proposed system for multiple signals of sound source are less than 2%. Therefore, it contributes to the research and development of small system.