Stream segregation enables a listener to disentangle multiple competing sequences of sounds. A recent study from our laboratory demonstrated that cortical neurons in anesthetized cats exhibit spatial stream segregation (SSS) by synchronizing preferentially to one of two sequences of noise bursts that alternate between two source locations. Here, we examine the emergence of SSS along the ascending auditory pathway. Extracellular recordings were made in anesthetized rats from the inferior colliculus (IC), the nucleus of the brachium of the IC (BIN), the medial geniculate body (MGB), and the primary auditory cortex (A1). Stimuli consisted of interleaved sequences of broadband noise bursts that alternated between two source locations. At stimulus presentation rates of 5 and 10 bursts per second, at which human listeners report robust SSS, neural SSS is weak in the central nucleus of the IC (ICC), it appears in the nucleus of the brachium of the IC (BIN) and in approximately two-thirds of neurons in the ventral MGB (MGBv), and is prominent throughout A1. The enhancement of SSS at the cortical level reflects both increased spatial sensitivity and increased forward suppression. We demonstrate that forward suppression in A1 does not result from synaptic inhibition at the cortical level. Instead, forward suppression might reflect synaptic depression in the thalamocortical projection. Together, our findings indicate that auditory streams are increasingly segregated along the ascending auditory pathway as distinct mutually synchronized neural populations.