Category formation allows us to group perceptual objects into meaningful classes and is fundamental to cognition. Categories can be derived from similarity relationships of object features by using prototypes or multiple exemplars, or from abstract relationships of features and rules . A variety of brain areas have been implicated in categorization processes, but mechanistic insights on the single-cell and local-network level are still rare and limited to the matching of individual objects to categories . For directional categorization of tone steps, as in melody recognition , abstract relationships between sequential events (higher or lower in frequency) have to be formed. To explore the neuronal mechanisms of this categorical identification of step direction, we trained monkeys for more than two years on a contour-discrimination task with multiple tone sequences. In the auditory cortex of these highly trained monkeys, we identified two interrelated types of neuronal firing: Increased phasic responses to tones categorically represented the reward-predicting downward frequency steps and not upward steps; subsequently, slow modulations of tonic firing predicted the behavioral decisions of the monkeys, including errors. Our results on neuronal mechanisms of categorical stimulus identification and of decision making attribute a cognitive role to auditory cortex, in addition to its role in signal processing.