The overall focus of my doctoral research was to characterize how sensory and behavioral context affect how the auditory brain perceives and interprets sound. In Chapter 1, I overview the anatomical and physiological background for the experimental work presented in the following chapters. In Chapter 2, we explored the neural bases of auditory streaming in the ferret cued by the repetition of a complex sound in the presence of a changing mixture. In humans, sound repetition evokes a strong pop-out effect that leads to the separation of the repeated sound in the foreground in the context of a changing background composed of a mixture of noise. We first confirmed that ferrets were able to perceive complex sound repetitions as distinct sensory objects. We then recorded single- and multiunit extracellular activity in response to these stimuli in core (A1) and belt (PEG) regions of the ferret auditory cortex. We found that auditory responses were reduced in response to the repetition of any given sound, likely as a consequence of neural adaptation. However, activity evoked by the repeating, foreground stream was selectively enhanced compared to the background, an effect that was more prominent in PEG and for units whose responses were tuned to the repeating sound. Taken together these results provide evidence for stream segregation that emerges in A1 and is refined in PEG. In Chapter 3, we combined behavior, electrophysiological and pupil size recordings, and modeling to dissociate the modulatory effects of two state variables, task engagement and arousal, on auditory processing at the level of the auditory midbrain and cortex. We found that arousal as indexed by pupil size accounted for a large component of the activity modulation between behavioral contexts. Because task- and arousal-related effects on neural activity were correlated, we found that many ofthe units – particularly in the IC – that would have been counted as modulated by task in a more traditional analysis, were in fact modulated either solely by arousal or by both. Furthermore, in IC, but not in A1, units with weaker auditory responses showed stronger state modulation. Taken together, these results demonstrate that task engagement and arousal can be dissociated in most neurons. This approach provides a general method for dissociating the influence of continuous and discrete behavioral state variables on sensory resentation.