The main goal of the present study was to investigate the encoding of a biologically-relevant acoustic feature--amplitude modulation (AM)--in single neurons of the auditory nerve and ventral cochlear nucleus (VCN). In the anesthetized gerbil auditory-nerve fibers and VCN units show strong synchronous responses to low-intensity, low-frequency AM. As frequency increases, the strength of the synchronous response decreases. In the auditory nerve the strength of the synchronous response is substantially less at high intensities than at low intensities and does not change significantly with AM frequency at high intensities. In contrast to the auditory nerve, VCN units show strong responses at high intensities. They have a particular AM frequency to which they are maximally responsive, and this frequency varies from unit to unit. Therefore, VCN units transform their ascending inputs by enhancing the synchronous response to AM. A correlation exists between a unit's ability to encode AM and its responses to simple sounds. Specifically, onset units show the strongest synchronous responses, followed in order by chopper, primarylike-with-notch and primarylike units. This enhancement is greatest at high intensities and can occur up to 90 dB above a unit's threshold. Thus, a hierarchy of enhancement for AM processing exists in the most peripheral nucleus of the central auditory system.