The ability to discriminate the spectral shapes of complex sounds is critical to accurate speech perception. Part of the difficulty experienced by listeners with hearing loss in understanding speech sounds in noise may be related to a smearing of the internal representation of the spectral peaks and valleys because of the loss of sensitivity and an accompanying reduction in frequency resolution. This study examined the discrimination by hearing-impaired listeners of highly similar harmonic complexes with a single spectral peak located in 1 of 3 frequency regions. The minimum level difference between peak and background harmonics required to discriminate a small change in the spectral center of the peak was measured for peaks located near 2, 3, or 4 kHz. Component phases were selected according to an algorithm thought to produce either highly modulated (positive Schroeder) or very flat (negative Schroeder) internal waveform envelopes in the cochlea. The mean amplitude difference between a spectral peak and the background components required for discrimination of pairs of harmonic complexes (spectral contrast threshold) was from 4 to 19 dB greater for listeners with hearing impairment than for a control group of listeners with normal hearing. In normal-hearing listeners, improvements in threshold were seen with increasing stimulus level, and there was a strong effect of stimulus phase, as the positive Schroeder stimuli always produced lower thresholds than the negative Schroeder stimuli. The listeners with hearing loss showed no consistent spectral contrast effects due to stimulus phase and also showed little improvement with increasing stimulus level, once their sensitivity loss was overcome. The lack of phase and level effects may be a result of the more linear processing occurring in impaired ears, producing poorer-than-normal frequency resolution, a loss of gain for low amplitudes, and an altered cochlear phase characteristic in regions of damage.