Extracellular signals from the endbulb of Held-spherical bushy cell (SBC) synapse exhibit up to three component waves ('P', 'A' and 'B'). Signals lacking the third component (B) are frequently observed but as the origin of each of the components is uncertain, interpretation of this lack of B has been controversial: is it a failure to release transmitter or a failure to generate or propagate an action potential? Our aim was to determine the origin of each component. We combined single- and multiunit in vitro methods in Mongolian gerbils and Wistar rats and used pharmacological tools to modulate glutamate receptors or voltage-gated sodium channels. Simultaneous extra- and intracellular recordings from single SBCs demonstrated a presynaptic origin of the P-component, consistent with data obtained with multielectrode array recordings of local field potentials. The later components (A and B) correspond to the excitatory postsynaptic potential (EPSP) and action potential of the SBC, respectively. These results allow a clear interpretation of in vivo extracellular signals. We conclude that action potential failures occurring at the endbulb-SBC synaptic junction largely reflect failures of the EPSP to trigger an action potential and not failures of synaptic transmission. The data provide the basis for future investigation of convergence of excitatory and inhibitory inputs in modulating transmission at a fully functional neuronal system using physiological stimulation.