The masking level difference (MLD) is a psychoacoustic measure of binaural interaction and central auditory processing related to extracting signals from noise backgrounds. It represents the improvement in threshold sensitivity under antiphasic listening conditions relative to homophasic conditions. A low frequency pure tone (500 Hz) was presented in-phase (So) binaurally to the subject in the presence of a phasic masker (No). The behavioural threshold obtained at this condition was used as a reference. The behavioural threshold was again determined with the pure tone stimulus presented antiphasically (S), and the difference in thresholds was calculated to determine the MLD. The MLD was measured for a 500 Hz pure tone in 36 Aboriginal children (16 males and 20 females) from an Aboriginal community school (Nguiu, Tiwi Islands) where conductive hearing loss, due to otitis media, is endemic. The control group consisted of 62 normal-hearing children (40 males and 22 females) from a private school in Darwin. Aboriginal children showed a mean MLD of 7.76 dB whereas the control group exhibited a mean MLD of 11.21 dB. Aboriginal children showed a consistently lower MLD than non-Aboriginal normal-hearing children. Auditory processing disorders (APDs) have been shown to be related to early auditory deprivation, a common feature of chronic conductive hearing loss observed frequently in Aboriginal children. Thus, the MLD provides a metric for assessing binaural hearing abilities which may be relevant to the assessment of APD and hearing aid fitting. The MLD is a less linguistically, less culturally biased predictive measure and may be more easily administered than many speech and language test procedures used in diagnosing APD.