Exposure to even a single episode of loud noise can damage synapses between cochlear hair cells and auditory nerve fibres, causing hidden hearing loss (HHL) that is not detected by audiometry. Here we investigate the effects of noise-induced HHL on functional hearing by measuring the ability of neurons in the auditory midbrain of mice to adapt to sound environments containing quiet and loud periods. Neurons from noise-exposed mice show less capacity for adaptation to loud environments, convey less information about sound intensity in those environments, and adaptation to the longer-term statistical structure of fluctuating sound environments is impaired. Adaptation comprises a cascade of both threshold and gain adaptation. Although noise exposure only impairs threshold adaptation directly, the preserved function of gain adaptation surprisingly aggravates coding deficits for loud environments. These deficits might help to understand why many individuals with seemingly normal hearing struggle to follow a conversation in background noise.