The current emphasis of the project is on mechanical and neurophysiological processes in the cochlea and in the auditory nerve. Recent investigations conducted on the project have indicated that the inner and outer hair cells of the cochlea interact, and that the latter inhibit the former. This interaction combined with the time delay and wave-form transformation expected to be produced by the spiral fibers fully account for responses to nonsinusoidal stimuli obtained on the project in single units of the auditory nerve. The interaction could also account for the neural sharpening of the frequency analysis in the cochlea. The numerical relationships of this sharpening will be further studied by means of single-unit recording from the auditory nerve, chchlear-microphonic recordings by means of differential electrodes, theoretical calculations, and network-model studies. In a separate but related line of investigation, the current study of incremental responses in single units of the auditory nerve will be continued. Past investigation has led to a functional model consisting of three parts: a nonlinear input stage, an intensity independent time decay function for the driven firing rate, and an output saturation. An effort will be made at a neurophysiological localization of the three components.