Fish acquire information about their aquatic environment by means of their mechanosensory lateral-line system. This system consists of superficial and canal neuromasts that sense perturbations in the water surrounding them. Based on a hydrodynamic model presented here, we propose a mechanism through which fish can localize the source of these perturbations. In doing so we include the curvature of the fish body, a realistic lateral line canal inter-pore distance for the lateral-line canals, and the surface boundary layer. Using our model to explore receptor behavior based on experimental data of responses to dipole stimuli we suggest that superficial and canal neuromasts employ the same mechanism, hence provide the same type of input to the central nervous system. The analytical predictions agree well with spiking responses recorded experimentally from primary lateral-line nerve fibers. From this, and taking into account the central organization of the lateral-line system, we present a simple biophysical model for determining the distance to a source.