Binaural hearing mechanisms were measured in dolphins (Inia geoffrensis) by recording the auditory nerve evoked response from the body surface. The azimuthal position of a sound source at 10-15 degrees from the longitudinal axis elicited interaural intensity disparity up to 20 dB and interaural latency difference as large as 250 microseconds. The latter was many times greater than the acoustical interaural time delay. This latency difference seems to be caused by the intensity disparity. The latency difference seems to be an effective way of coding of intensity disparity.