The present study examined the extent to which verbal auditory agnosia (VAA) is primarily a phonemic decoding disorder, as contrasted to a more global defect in acoustic processing. Subjects were six young adults who presented with VAA in childhood and who, at the time of testing, showed varying degrees of residual auditory discrimination impairment. They were compared to a group of young adults with normal language development matched for age and gender. Cortical event-related potentials (ERPs) were recorded to tones and to consonant-vowel stimuli presented in an "oddball" discrimination paradigm. In addition to cortical ERPs, auditory brainstem responses (ABRs) and middle latency responses (MLRs) were recorded. Cognitive and language assessments were obtained for the VAA subjects. ABRs and MLRs were normal. In comparison with the control group, the cortical ERPs of the VAA subjects showed a delay in the N1 component recorded over lateral temporal cortex both to tones and to speech sounds, despite an N1 of normal latency overlying the frontocentral region of the scalp. These electrophysiologic findings indicate a slowing of processing of both speech and nonspeech auditory stimuli and suggest that the locus of this abnormality is within the secondary auditory cortex in the lateral surface of the temporal lobes.