The early onset of peripheral deafness profoundly alters the functional maturation of the central auditory system. A prolonged exposure to an artificial acoustic environment has a similar disruptive influence. These observations establish the importance of normal patterns of sound-driven activity during the initial stages of auditory development. The present study was designed to address the role of cochlear gain control during these activity-dependent developmental processes. It was hypothesized that the regulation of auditory nerve activity by the medial olivocochlear system (MOCS) would preserve normal development when the immature auditory system was challenged by continuous background noise. To test this hypothesis, knock-out mice lacking MOCS feedback were reared in noisy or quiet environments and then evaluated with behavioral paradigms for auditory processing deficits. Relative to wild-type controls, noise-reared knock-out mice showed a decreased ability to process rapid acoustic events. Additional anatomical and physiological assessments linked these perceptual deficits to synaptic defects in the auditory brainstem that shared important features with human auditory neuropathy. Our findings offer a new perspective on the potentially damaging effects of environmental noise and how these risks are ameliorated by the protective role of MOCS feedback.