Vowels make a strong contribution to speech perception under natural conditions. Vowels are encoded in the auditory nerve primarily through neural synchrony to temporal fine structure and to envelope fluctuations rather than through average discharge rate. Neural synchrony is thought to contribute less to vowel coding in central auditory nuclei, consistent with more limited synchronization to fine structure and the emergence of average-rate coding of envelope fluctuations. However, this hypothesis is largely unexplored, especially in background noise. The present study examined coding mechanisms at the level of the midbrain that support behavioral sensitivity to simple vowel-like sounds using neurophysiological recordings and matched behavioral experiments in the budgerigar. Stimuli were harmonic tone complexes with energy concentrated at one spectral peak, or formant frequency, presented in quiet and in noise. Behavioral thresholds for formant-frequency discrimination decreased with increasing amplitude of stimulus envelope fluctuations, increased in noise, and were similar between budgerigars and humans. Multiunit recordings in awake birds showed that the midbrain encodes vowel-like sounds both through response synchrony to envelope structure and through average rate. Whereas neural discrimination thresholds based on either coding scheme were sufficient to support behavioral thresholds in quiet, only synchrony-based neural thresholds could account for behavioral thresholds in background noise. These results reveal an incomplete transformation to average-rate coding of vowel-like sounds in the midbrain. Model simulations suggest that this transformation emerges due to modulation tuning, which is shared between birds and mammals. Furthermore, the results underscore the behavioral relevance of envelope synchrony in the midbrain for detection of small differences in vowel formant frequency under real-world listening conditions.