The precedence effect describes the phenomenon whereby echoes are spatially fused to the location of an initial sound by selectively suppressing the directional information of lagging sounds (echo suppression). Echo suppression is a prerequisite for faithful sound localization in natural environments but can break down depending on the behavioral context. To date, the neural mechanisms that suppress echo directional information without suppressing the perception of echoes themselves are not understood. We performedin vivorecordings in Mongolian gerbils of neurons of the dorsal nucleus of the lateral lemniscus (DNLL), a GABAergic brainstem nucleus that targets the auditory midbrain, and show that these DNLL neurons exhibit inhibition that persists tens of milliseconds beyond the stimulus offset, so-called persistent inhibition (PI). Usingin vitrorecordings, we demonstrate that PI stems from GABAergic projections from the opposite DNLL. Furthermore, these recordings show that PI is attributable to intrinsic features of this GABAergic innervation. Implementation of these physiological findings into a neuronal model of the auditory brainstem demonstrates that, on a circuit level, PI creates an enhancement of responsiveness to lagging sounds in auditory midbrain cells. Moreover, the model revealed that such response enhancement is a sufficient cue for an ideal observer to identify echoes and to exhibit echo suppression, which agrees closely with the percepts of human subjects.