An influential theory attributes developmental disorders of language and literacy to low-level auditory perceptual difficulties. However, evidence to date has been inconsistent and contradictory. We investigated whether this mixed picture could be explained in terms of heterogeneity in the language-impaired population. In Experiment 1, the behavioural responses of 16 people with specific language impairment (SLI) and 16 control listeners (aged 10 to 19 years) to auditory backward recognition masking (ABRM) stimuli and unmasked tones indicated that a subgroup of people with SLI are less able to discriminate between the frequencies of sounds regardless of their rate of presentation. Further, these people tended to be the younger participants, and were characterised by relatively poor nonword reading. In Experiment 2, the auditory event-related potentials (ERPs) of the same groups to unmasked tones were measured. Listeners with SLI tended to have age-inappropriate waveforms in the N1-P2-N2 region, regardless of their auditory discrimination scores in Experiment 1. Together, these results suggest that SLI may be characterised by immature development of auditory cortex, such that adult-level frequency discrimination performance is attained several years later than normal.