Sound localization critically depends on detection of differences in arrival time of sounds at the two ears (acoustic delay). The fundamental mechanisms are debated, but all proposals include a process of coincidence detection and a separate source of internal delay that offsets the acoustic delay and determines neural tuning. We used in vivo patch-clamp recordings of binaural neurons in the Mongolian gerbil and pharmacological manipulations to directly compare neuronal input to output and to separate excitation from inhibition. Our results cannot be accounted for by existing models and reveal that coincidence detection is not an instantaneous process, but is instead shaped by the interaction of intrinsic conductances with preceding synaptic activity. This interaction generates an internal delay as an intrinsic part of the process of coincidence detection. The multiplication and time-shifting stages thought to extract synchronous activity in many brain areas can therefore be combined in a single operation.