The goals were to study the physiological effects of auditory nerve myelinopathy in chinchillas and to test the hypothesis that myelin abnormalities could account for auditory neuropathy, a hearing disorder characterized by absent auditory brainstem responses (ABRs) with preserved outer hair cell function. Doxorubicin, a cytotoxic drug used as an experimental demyelinating agent, was injected into the auditory nerve bundle of 18 chinchillas; six other chinchillas were injected with vehicle alone. Cochlear microphonics, compound action potentials (CAPs), inferior colliculus evoked potentials (IC-EVPs), cubic distortion product otoacoustic emissions and ABRs were recorded before and up to 2 months after injection. Cochleograms showed no hair cell loss in any of the animals and measures of outer hair cell function were normal (cubic distortion product otoacoustic emissions) or enhanced (cochlear microphonics) after injection. ABR was present in animals with mild myelin damage (n = 10) and absent in animals with severe myelin damage that included the myelin surrounding spiral ganglion cell bodies and fibers in Rosenthal's canal (n = 8). Animals with mild damage had reduced response amplitudes at 1 day, followed by recovery of CAP and enhancement of the IC-EVP. In animals with severe damage, CAP and IC-EVP thresholds were elevated, amplitudes were reduced, and latencies were prolonged at 1 day and thereafter. CAPs deteriorated over time, whereas IC-EVPs partially recovered; latencies remained consistently prolonged despite changes in amplitudes. The results support auditory nerve myelinopathy as a possible pathomechanism of auditory neuropathy but indicate that myelinopathy must be severe before physiological measures are affected.