I have the RES system. I could not find any information about decoding Dolby digital but after testing it I believe that it does. If it turns out that it doesn't then it does something beyond surround sound. I used a DVD called AVIA which I also use on my home theater system. In one test you can hear a noise fade from one speaker to the next in a circle around the car. I don't think you can do that with just Dolby Surround Sound. Overall I'm impressed with the sound system and the playback of DVD's. If you have a Dolby Digital System at home I don't think you will be disappointed with the Pilot's Audio. The bass is also very good. As they say, it's all good.