Envelope temporal fluctuations are critical for effective processing of biologically relevant sounds including speech, animal vocalizations, sound-source location and pitch. Amplitude modulation (AM) of sound envelopes can be encoded in quiet with high fidelity by some auditory neurons, including those of the cochlear nucleus. From both neurophysiological and clinical perspectives, it is important to understand the effects of background noise on the processing of AM. To further this goal, single-unit recordings were made from dorsal cochlear nucleus (DCN) units in urethane-anesthetized chinchillas. All units of this study were classified as pauser/buildup or On-s units according to PSTH response patterns, first spike latencies, and shape of best-frequency (BF) rate-intensity functions. BF pure-tone and AM (10-500 Hz) tone bursts were presented at several sound levels, in quiet and in the presence of a continuous wideband masker. The following was found: (1) DCN units can enhance their AM coding relative to quiet in the presence of loud noise (+14 or +19 dB S/N) and at high signal levels (e.g. 75 dB SPL); (2) for the sample of units of the present study, this is usually achieved by lowering the average firing rate and increasing the synchronous (fundamental frequency) response; (3) for some units, the AM coding stays the same or declines in the background noise. The nature of these findings suggests that part of a DCN unit's abilities to preserve or enhance AM coding with masking noise results from peripheral operating range shifts, whereas part comes from intrinsic circuitry (inhibitory inputs) or cellular mechanisms (dendritic filtering of sound temporal features) within the DCN.