The changes in perception and in the binaural difference waveform (BD) for dichotic clicks with interaural time and level differences (ITDs and ILDs) are compared. Only beta, the first major peak of the BD, correlated with the perceptual measurements. Whenever beta is clearly present, the clicks are perceived as a unitary fused image. Whenever the clicks are perceived as not fused, beta is undetectable by our methods. The amplitude of beta remains nearly constant as the ITD is increased to about 1 ms, while the click's position is perceived as moving from midline toward the leading ear. Over about the next 0.2 ms, beta becomes undetectable, as the image stops moving and loses its fused quality. As the ILD is increased, beta amplitude decreases gradually, while the image remains unitary and moves toward the unattenuated earphone. Thus beta becomes undetectable for ILDs of 30 to 35 dB, and the dichotic clicks become indistinguishable from monotic clicks for ILDs of 44 to 53 dB. The ITD and ILD matching curve for beta latency is similar to the ITD and ILD psychophysical matching curve for lateralization. These results suggest that beta is a physiological correlate of the categorical percept, binaural fusion, and is generated by a brainstem structure essential for the preception of click lateralization.