People with sensorineural hearing loss have difficulty understanding speech, especially when background sounds are present. A reduction in the ability to resolve the frequency components of complex sounds is one factor contributing to this difficulty. Here, we show that a reduced ability to process the temporal fine structure of sounds plays an important role. Speech sounds were processed by filtering them into 16 adjacent frequency bands. The signal in each band was processed by using the Hilbert transform so as to preserve either the envelope (E, the relatively slow variations in amplitude over time) or the temporal fine structure (TFS, the rapid oscillations with rate close to the center frequency of the band). The band signals were then recombined and the stimuli were presented to subjects for identification. After training, normal-hearing subjects scored perfectly with unprocessed speech, and were Ϸ90% correct with E and TFS speech. Both young and elderly subjects with moderate flat hearing loss performed almost as well as normal with unprocessed and E speech but performed very poorly with TFS speech, indicating a greatly reduced ability to use TFS. For the younger hearing-impaired group, TFS scores were highly correlated with the ability to take advantage of temporal dips in a background noise when identifying unprocessed speech. The results suggest that the ability to use TFS may be critical for ''listening in the background dips.'' TFS stimuli may be useful in evaluating impaired hearing and in guiding the design of hearing aids and cochlear implants.background noise ͉ dip listening ͉ hearing impairment ͉ speech intelligibility