Data from a full assessment of auditory perception in patients with schizophrenia were used to investigate whether auditory hallucinations are associated with abnormality of central auditory processing.Three groups of subjects participated in auditory assessments: 22 patients with psychosis and a recent history of auditory hallucinations, 16 patients with psychosis but no history of auditory hallucinations, and 22 normal subjects. Nine auditory assessments, including auditory brainstem response, monotic and dichotic speech perception tests, and nonspeech perceptual tests, were performed. Statistical analyses for group differences were performed using analysis of variance and Kruskal-Wallis tests. The results of individual patients with test scores in the severely abnormal range (more than three standard deviations from the mean for the normal subjects) were examined for patterns that suggested sites of dysfunction in the central auditory system.The results showed significant individual variability among the subjects in both patient groups. There were no group differences on tests that are sensitive to low brainstem function. Both patient groups performed poorly in tests that are sensitive to cortical or high brainstem function, and hallucinating patients differed from nonhallucinating patients in scores on tests of filtered speech perception and response bias patterns on dichotic speech tests. Six patients in the hallucinating group had scores in the severely abnormal range on more than one test.Hallucinations may be associated with auditory dysfunction in the right hemisphere or in the interhemispheric pathways. However, comparison of results for the patient groups suggests that the deficits seen in hallucinating patients may represent a greater degree of the same types of deficits seen in nonhallucinating patients.