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Locomotion generates adventitious sounds which enable detection and localization of predators and prey. Such sounds contain brisk changes or transients in amplitude. We investigated the hypothesis that ill-understood temporal specializations in binaural circuits subserve lateralization of such sound transients, based on different time of arrival at the ears (interaural time differences, ITDs). We find that Lateral Superior Olive (LSO) neurons show exquisite ITD-sensitivity, reflecting extreme precision and reliability of excitatory and inhibitory postsynaptic potentials, in contrast to Medial Superior Olive neurons, traditionally viewed as the ultimate ITD-detectors. In vivo, inhibition blocks LSO excitation over an extremely short window, which, in vitro, required synaptically evoked inhibition. Light and electron microscopy revealed inhibitory synapses on the axon initial segment as the structural basis of this observation. These results reveal a neural vetoing mechanism with extreme temporal and spatial precision and establish the LSO as the primary nucleus for binaural processing of sound transients.