Compression in the basilar-membrane input-output response flattens the temporal envelope of a fluctuating signal when more gain is applied to lower level than higher level temporal components. As a result, level-dependent changes in gap detection for signals with different depths of envelope fluctuation and for subjects with normal and impaired hearing may reveal effects of compression. To test these assumptions, gap detection with and without a broadband noise was measured with 1, 000-Hz-wide (flatter) and 50-Hz-wide (fluctuating) noise markers as a function of marker level. As marker level increased, background level also increased, maintaining a fixed acoustic signal-to-noise ratio (SNR) to minimize sensation-level effects on gap detection. Significant level-dependent changes in gap detection were observed, consistent with effects of cochlear compression. For the flatter marker, gap detection that declines with increases in level up to mid levels and improves with further increases in level may be explained by an effective flattening of the temporal envelope at mid levels, where compression effects are expected to be strongest. A flatter effective temporal envelope corresponds to a reduced effective SNR. The effects of a reduction in compression (resulting in larger effective SNRs) may contribute to better-than-normal gap detection observed for some hearing-impaired listeners.