To make sense of the auditory world, listeners must organize diverse, continuously varying sounds into meaningful perceptual categories. The auditory categorization process is believed to be a foundational skill for language development and speech perception. Despite decades of behavioral research, neuroscientific evidence is only beginning to uncover where, when, and how auditory categories arise in the brain. Although it has been proposed that categorical perception is shaped by both innate (nature) and experience-driven (nurture) factors, it is unclear how these features manifest neurally at the individual level. In the first study of this dissertation, we recorded multi-channel electroencephalography (EEG) in nonmusicians who varied in their intrinsic musical listening skills (i.e., musicality) and evaluated their performance on a speech categorization task. The results demonstrated that listeners with naturally superior musicality exhibit sensory processing advantages within the right auditory cortex which enables more efficient and robust categorization. The second study then assessed whether neural encoding differences influenced learning of unfamiliar auditory categories. Using a rapid learning paradigm, musically naive listeners were trained to identify musical interval categories (i.e., minor and major thirds). More successful category learners showed more efficient post-training sensory encoding of musical intervals by [approximately]150-200 ms (i.e., P2). Structural magnetic resonance imaging (MRI) also revealed differences in gray matter and cortical thickness within auditory cortex associated with categorization performance, indicating that the acquisition of auditory categories is driven by a layering of preexisting and short-term plastic changes in brain function. Functional asymmetries were also observed across both studies, suggesting that networks in the right auditory cortex may contribute to enhanced categorization and/or may be more sensitive to individual perceptual differences in general. Taken together, these results highlight the complex interplay of both nature and nurture in auditory categorization. Intrinsic, individual differences in neural function cultivate sensory processing advantages within auditory cortex that are shaped by experience (e.g., learning) and promote enhanced categorization and perception of sounds. [The dissertation citations contained here are published with the permission of ProQuest LLC. Further reproduction is prohibited without permission. Copies of dissertations may be obtained by Telephone (800) 1-800-521-0600. Web page: http://www.proquest.com/en-US/products/dissertations/individuals.shtml.]