Across all sensory modalities, the effect of context-dependent neural adaptation can be observed at every level, from receptors to perception. Nonetheless, it has long been assumed that the processing of interaural time differences, which is the primary cue for sound localization, is nonadaptive, as its outputs are mapped directly onto a hard-wired representation of space. Here we present evidence derived from in vitro and in vivo experiments in gerbils indicating that the coincidence-detector neurons in the medial superior olive modulate their sensitivity to interaural time differences through a rapid, GABA(B) receptor-mediated feedback mechanism. We show that this mechanism provides a gain control in the form of output normalization, which influences the neuronal population code of auditory space. Furthermore, psychophysical tests showed that the paradigm used to evoke neuronal GABA(B) receptor-mediated adaptation causes the perceptual shift in sound localization in humans that was expected on the basis of our physiological results in gerbils.