The auditory brainstem response (ABR) is a sound-evoked noninvasively measured electrical potential representing the sum of neuronal activity in the auditory brainstem and midbrain. ABR peak amplitudes and latencies are widely used in human and animal auditory research and for clinical screening. The binaural interaction component (BIC) of the ABR stands for the difference between the sum of the monaural ABRs and the ABR obtained with binaural stimulation. The BIC comprises a series of distinct waves, the largest of which (DN1) has been used for evaluating binaural hearing in both normal hearing and hearing-impaired listeners. Based on data from animal and human studies, the authors discuss the possible anatomical and physiological bases of the BIC (DN1 in particular). The effects of electrode placement and stimulus characteristics on the binaurally evoked ABR are evaluated. The authors review how interaural time and intensity differences affect the BIC and, analyzing these dependencies, draw conclusion about the mechanism underlying the generation of the BIC. Finally, the utility of the BIC for clinical diagnoses are summarized.