The aim of this study was to investigate the mechanisms involved in the perception of perceptually salient frequency modulation (FM) using auditory steady-state responses (ASSRs) measured with magnetoencephalography (MEG). Previous MEG studies using frequency-modulated amplitude modulation as stimuli (Luo et al., 2006, 2007) suggested that a phase modulation encoding mechanism exists for low (<5 Hz) FM modulation frequencies but additional amplitude modulation encoding is required for faster FM modulation frequencies. In this study single-cycle sinusoidal FM stimuli were used to generate the ASSR. The stimulus was either an unmodulated 1-kHz sinusoid or a 1-kHz sinusoid that was frequency-modulated with a repetition rate of 4, 8, or 12 Hz. The fast Fourier transform (FFT) of each MEG channel was calculated to obtain the phase and magnitude of the ASSR in sensor-space and multivariate Hotelling's T(2) statistics were used to determine the statistical significance of ASSRs. MEG beamformer analyses were used to localise the ASSR sources. Virtual electrode analyses were used to reconstruct the time series at each source. FFTs of the virtual electrode time series were calculated to obtain the amplitude and phase characteristics of each source identified in the beamforming analyses. Multivariate Hotelling's T(2) statistics were used to determine the statistical significance of these reconstructed ASSRs. The results suggest that the ability of auditory cortex to phase-lock to FM is dependent on the FM pulse rate and that the ASSR to FM is lateralised to the right hemisphere.