Responses of low characteristic-frequency (CF) neurons in the inferior colliculus were obtained to amplitude-modulated (AM) high-frequency tones in which the modulation rate was equal to the neuron's CF. Despite all spectral components lying outside the pure tone-evoked response areas, discharge rates were modulated by the AM signals. Introducing a low-frequency tone (CF - 1 Hz) to the same ear as the AM tones produced a 1-Hz beat in the neural response. Introducing a tone (CF - 1 Hz) to the opposite ear to the AM tone also produced a beat in the neural response, with the beat at the period of the interaural phase difference between the CF - 1 Hz tone in one ear, and the AM rate in the other ear. The monaural and interaural interactions of the AM signals with introduced pure tones suggest that AM tones generate combination tones, (inter-modulation distortion) on the basilar membrane. These interact with low-frequency tones presented to the same ear to produce monaural beats on the basilar membrane, modulating the responses of inferior colliculus (IC) neurons on the 1-Hz period of the monaural beats or interacting binaurally with neural input generated in response to stimulation of the opposite ear. The auditory midbrain appears to show a robust representation of cochlear distortions generated by amplitude-modulated sounds.