Purpose: This study tested the hypotheses that (a) sensitivity to spectral modulation has a protracted course of development; (b) its development can be disrupted by diminished auditory experience early in life, as children with chronic otitis media often encounter; and (c) delays in development of spectral modulation sensitivity put children at risk for delays in development of phonological sensitivity, but not vocabulary acquisition. Method: Participants were 22 children with significant, documented histories of otitis media before 3 years of age, 16 children with negative histories of otitis media, and 21 adults. Thresholds of 70.7% were obtained for detection of spectral modulation in signals with low modulation rates (0.5-2.0 cycles per octave) using transformed up-down procedures. Standard scores for vocabulary and percent correct scores for phonological sensitivity were also obtained. Results: The three hypotheses were supported: (a) Even children with no significant histories of otitis media had higher (poorer) spectral modulation detection thresholds than adults; (b) children with significant histories of otitis media had higher spectral modulation detection thresholds than children without those histories; and (c) Spectral modulation detection thresholds were strongly correlated with phonological sensitivity, but not with vocabulary size for children. Conclusions: The central auditory pathways have a protracted developmental course that can be disrupted by temporary hearing loss early in life. This disruption in auditory development has cascading effects on suprathreshold functions, as well as on the language phenomena dependent upon development of those suprathreshold functions. These findings have implications beyond children with histories of otitis media.