The barn owl uses interaural time differences (ITDs) to localize the azimuthal position of sound. ITDs are processed by an anatomically distinct pathway in the brainstem. Neuronal selectivity for ITD is generated in the nucleus laminaris (NL) and conveyed to both the anterior portion of the ventral nucleus of the lateral lemniscus (VLVa) and the central (ICc) and external (ICx) nuclei of the inferior colliculus. With tonal stimuli, neurons in all regions are found to respond maximally not only to the real ITD, but also to ITDs that differ by integer multiples of the tonal period. This phenomenon, phase ambiguity, does not occur when ICx neurons are stimulated with noise. The main aim of this study was to determine the role of GABAergic inhibition in the processing of ITDs. Selectivity for ITD is similar in the NL and VLVa and improves in the ICc and ICx. Iontophoresis of bicuculline methiodide (BMI), a selective GABAA antagonist, decreased the ITD selectivity of ICc and ICx neurons, but did not affect that of VLVa neurons. Responses of VLVa and ICc neurons to unfavorable ITDs were below the monaural response levels. BMI raised both binaural responses to unfavorable ITDs and monaural responses, though the former remained smaller than the latter. During BMI application, ICx neurons showed phase ambiguity to noise stimuli and no longer responded to a unique ITD. BMI increased the response magnitude and changed the temporal discharge patterns in the VLVa, ICc, and ICx. Iontophoretically applied GABA exerted effects opposite to those of BMI, and the effects could be antagonized with simultaneous application of BMI. These results suggest that GABAergic inhibition (1) sharpens ITD selectivity in the ICc and ICx, (2) contributes to the elimination of phase ambiguity in the ICx, and (3) controls response magnitude and temporal characteristics in the VLVa, ICc, and ICx. Through these actions, GABAergic inhibition shapes the horizontal dimension of the auditory receptive fields.