A critical binaural cue important for sound localization and detection of signals in noise is the interaural time difference (ITD), or difference in the time of arrival of sounds at each ear. The ITD can be determined by cross-correlating the sounds at the two ears and finding the ITD where the correlation is maximal. The amount of interaural correlation is affected by properties of spaces and can therefore be used to assess spatial attributes. To examine the neural basis for sensitivity to the overall level of the interaural correlation, we identified subcollicular neurons and neurons in the inferior colliculus (IC) and auditory cortex of unanesthetized rabbits that were sensitive to ITDs and examined their responses as the interaural correlation was varied. Neurons at each brain level could show linear or non-linear responses to changes in interaural correlation. The direction of the non-linearities in most neurons was to increase the slope of the response change for correlations near 1.0. The proportion of neurons with non-linear responses was similar in subcollicular and IC neurons but increased in the auditory cortex. Non-linear response functions to interaural correlation were not related to the type of response as determined by the tuning to ITDs across frequencies. The responses to interaural correlation were also not related to the frequency tuning of the neuron, unlike the responses to ITD, which broadens for neurons tuned to lower frequencies. The neural discriminibility of the ITD using frozen noise in the best neurons was similar to the behavioral acuity in humans at a reference correlation of 1.0. However, for other reference ITDs the neural discriminibility was more linear and generally better than the human discriminibility of the interaural correlation, suggesting that stimulus rather than neural variability is the basis for the decline in human performance at lower levels of interaural correlation.