Despite the peripheral and central immaturities that limit auditory processing in juvenile animals, they are able to lateralize sounds using binaural cues. This study explores a central mechanism that may compensate for these limitations during development. Interaural time and level difference processing by neurons in the superior olivary complex depends on synaptic inhibition from the medial nucleus of the trapezoid body (MNTB), a group of inhibitory neurons that is activated by contralateral sound stimuli. In this study, we examined the maturation of coding properties of MNTB neurons and found that they receive an inhibitory influence from the ipsilateral ear that is modified during the course of postnatal development. Single neuron recordings were obtained from the MNTB in juvenile (postnatal day 15-19) and adult gerbils. Approximately 50% of all recorded MNTB neurons were inhibited by ipsilateral sound stimuli, but juvenile neurons displayed a much greater suppression of firing as compared to those in adults. A comparison of the pre-potential and postsynaptic action potential indicated that inhibition occurred at the presynaptic level, likely within the cochlear nucleus. A simple linear model of level difference detection by lateral superior olivary neurons that receive input from MNTB suggested that inhibition of the MNTB may expand the response of LSO neurons to physiologically realistic level differences, particularly in juvenile animals, at a time when these cues are reduced.