We investigated the modulation of lateral inhibition in the human auditory cortex by means of magnetoencephalography (MEG). In the first experiment, five acoustic masking stimuli (MS), consisting of noise passing through a digital notch filter which was centered at 1 kHz, were presented. The spectral energy contrasts of four MS were modified systematically by either amplifying or attenuating the edge-frequency bands around the notch (EFB) by 30 dB. Additionally, the width of EFB amplification/attenuation was varied (3/8 or 7/8 octave on each side of the notch). N1m and auditory steady state responses (ASSR), evoked by a test stimulus with a carrier frequency of 1 kHz, were evaluated. A consistent dependence of N1m responses upon the preceding MS was observed. The minimal N1m source strength was found in the narrowest amplified EFB condition, representing pronounced lateral inhibition of neurons with characteristic frequencies corresponding to the center frequency of the notch (NOTCH CF) in secondary auditory cortical areas. We tested in a second experiment whether an even narrower bandwidth of EFB amplification would result in further enhanced lateral inhibition of the NOTCH CF. Here three MS were presented, two of which were modified by amplifying 1/8 or 1/24 octave EFB width around the notch. We found that N1m responses were again significantly smaller in both amplified EFB conditions as compared to the NFN condition. To our knowledge, this is the first study demonstrating that the energy and width of the EFB around the notch modulate lateral inhibition in human secondary auditory cortical areas. Because it is assumed that chronic tinnitus is caused by a lack of lateral inhibition, these new insights could be used as a tool for further improvement of tinnitus treatments focusing on the lateral inhibition of neurons corresponding to the tinnitus frequency, such as the tailor-made notched music training.