Hearing-impaired listeners struggle to understand speech in noise, even when using cochlear implants (CIs) or hearing aids. Successful listening in noisy environments depends on the brain's ability to organize a mixture of sound sources into distinct perceptual streams (i.e., source segregation). In normal-hearing listeners, temporal coherence of sound fluctuations across frequency channels supports this process by promoting grouping of elements belonging to a single acoustic source. We hypothesized that reduced spectral resolution-a hallmark of both electric/CI (from current spread) and acoustic (from broadened tuning) hearing with sensorineural hearing loss-degrades segregation based on temporal coherence. This is because reduced frequency resolution decreases the likelihood that a single sound source dominates the activity driving any specific channel; concomitantly, it increases the correlation in activity across channels. Consistent with our hypothesis, predictions from a physiologically plausible model of temporal-coherence-based segregation suggest that CI current spread reduces comodulation masking release (CMR; a correlate of temporal-coherence processing) and speech intelligibility in noise. These predictions are consistent with our behavioral data with simulated CI listening. Our model also predicts smaller CMR with increasing levels of outer-hair-cell damage. These results suggest that reduced spectral resolution relative to normal hearing impairs temporal-coherence-based segregation and speech-in-noise outcomes.