The physiological mechanisms that contribute to abnormal encoding of speech in children with learning problems are yet to be well understood. Furthermore, speech perception problems appear to be particularly exacerbated by background noise in this population. This study compared speech-evoked cortical responses recorded in a noisy background to those recorded in quiet in normal children (NL) and children with learning problems (LP). Timing differences between responses recorded in quiet and in background noise were assessed by cross-correlating the responses with each other. Overall response magnitude was measured with root-mean-square (RMS) amplitude. Cross-correlation scores indicated that 23% of LP children exhibited cortical neural timing abnormalities such that their neurophysiological representation of speech sounds became distorted in the presence of background noise. The latency of the N2 response in noise was isolated as being the root of this distortion. RMS amplitudes in these children did not differ from NL children, indicating that this result was not due to a difference in response magnitude. LP children who participated in a commercial auditory training program and exhibited improved cortical timing also showed improvements in phonological perception. Consequently, auditory pathway timing deficits can be objectively observed in LP children, and auditory training can diminish these deficits.