Deficient temporal discrimination and vulnerability to masking effects caused by rapidly succeeding or simultaneous sounds might be one factor underlying the phonological difficulties in dyslexia. We evaluated cortical auditory discrimination in dyslexia by recording the mismatch negativity (MMN) for a simple pitch change, for an order reversal of tone pairs, and for tone-pair order reversals, with a third tone either preceding or following the tone pairs. It was found that when an additional tone followed the pairs the MMN amplitude was attenuated, suggesting elevated backward-masking effects in the auditory cortex of dyslexic individuals. In addition, the MMN elicited by pitch change was diminished over the left hemisphere of the dyslexic individuals suggesting left hemisphere auditory dysfunction. These results suggest impaired cortical discrimination of sounds and lowered tolerance for the masking effects of rapidly following sounds in dyslexia.