Nonlinearities of the peripheral auditory system generate distortion products which present to the central auditory system as apparent acoustic stimuli. The frequency and amplitude of distortion products reflect the frequency, phase and amplitude relationship of the components of a complex stimulus. When the stimulus consists of harmonically-related primaries, the amplitudes of the major distortion products are a function of the relative phase of the presented (primary) tones. We have previously shown (McAnally and Calford, 1990) that the variation of amplitude of the distortion as a function of the relative phase of a pair of harmonically-related primaries is well modelled as a function of the interaction of the multiple modes of distortion which fall at the same frequency (e.g. difference frequency and cubic difference frequency). A possibility raised by this result is that coherence of frequency modulation (that which maintains harmonicity) could be encoded in the amplitude of distortion. This was examined in measurements of both the cochlear microphonic potential (CM) and the responses of auditory nerve fibres in anaesthetized cats. Very small deviations from coherence of frequency modulation produced changes in the amplitude of the CM potential at the frequency of distortion. Also the discharges of auditory nerve fibres tuned to the frequency of distortion were found to be modulated at the same frequency as the amplitude changes observed in the CM. There was no variation in distortion amplitude in the CM and no modulation of auditory nerve discharges when primaries were frequency modulated coherently. It is suggested that amplitude modulation of distortion gives the auditory system its demonstrated sensitivity to minor departures from coherence of frequency-modulated, harmonically-related tones.