Listeners with sensorineural hearing loss have well-documented elevated hearing thresholds; reduced auditory dynamic ranges; and reduced spectral (or frequency) resolution that may reduce speech intelligibility, especially in the presence of competing sounds. Amplification and amplitude compression partially compensate for elevated thresholds and reduced dynamic ranges but do not remediate the loss in spectral resolution. Spectral-enhancement processing algorithms have been developed that putatively compensate for decreased spectral resolution by increasing the spectral contrast, or the peak-to-trough ratio, of the speech spectrum. Several implementations have been proposed, with mixed success. It is unclear whether the lack of strong success was due to specific implementation parameters or whether the concept of spectral enhancement is fundamentally flawed. The goal of this study was to resolve this ambiguity by testing the effects of spectral enhancement on detection and discrimination of simple, well-defined signals. To that end, groups of normal-hearing (NH) and hearing-impaired (HI) participants listened in 2 psychophysical experiments, including detection and frequency discrimination of narrowband noise signals in the presence of broadband noise. The NH and HI listeners showed an improved ability to detect and discriminate narrowband increments when there were spectral decrements (notches) surrounding the narrowband signals. Spectral enhancements restored increment detection thresholds to within the normal range when both energy and spectral-profile cues were available to listeners. When only spectral-profile cues were available for frequency discrimination tasks, performance improved for HI listeners, but not all HI listeners reached normal levels of discrimination. These results suggest that listeners are able to take advantage of the local improvement in signal-to-noise ratio provided by the spectral decrements.