Children experiencing chronic conductive hearing loss (CHL) early in life often display binaural hearing impairments that persist long after CHL is resolved, suggesting abnormal central auditory development. Previous data has shown that CHL (eg, due to an ear infection) can attenuate sound in the affected ear by> 30 dB, thus dramatically distorting the interaural level difference (ILD) cues used for high-frequency sound localization. The proposed research tests the hypothesis that abnormal neural coding of ILDs resulting from chronic CHL during development underlies the binaural hearing impairments. Animals were raised with a unilateral CHL (ie, an earplug) and the following were assessed following earplug removal: 1) behavioral spatial acuity, 2) the binaural interaction component (BIC) of the auditory brainstem response (ABR), and 3) neural information processing in the auditory midbrain (inferior colliculus, IC). All animals raised with CHL showed behavioral and physiological impairments. Behaviorally, animals displayed larger minimum audible angles for high-pass noise compared to age-matched controls (~ 2x worse-than-controls), suggesting impaired ILD sensitivity. Physiologically, animals displayed abnormal BICs of the ABR (eg, reduced BIC amplitude) indicating altered binaural processing in the auditory brainstem. To examine alterations of binaural processing in more detail, extracellular recordings were made in the inferior colliculus, and ILD discrimination thresholds for single neurons were determined using Fisher Information. Across the population of CHL-exposed animals, neural ILD discrimination was moderately impaired compared to controls. The results of this study suggest that experiencing a temporary unilateral hearing loss alters the normal development of spatial hearing, which may be attributed to impaired binaural processing at the level of the brainstem and IC.