Auditory-nerve (AN) loss has emerged as a significant public health concern because it occurs steadily with age and potentially following noise-induced temporary threshold shifts. AN loss without hair-cell damage remains undetectable with an audiogram yet is commonly assumed to degrade auditory perception under real-world, noisy conditions. Here, we tested whether AN loss impacts behavioral tone-in-noise (TIN) detection in the budgerigar, an avian species with sensitivity similar to humans on many simple and complex listening tasks. AN damage was induced with kainic acid and confirmed using auditory evoked potentials and otoacoustic emissions. TIN thresholds were quantified in 1/3-octave noise as a function of frequency and sound level using operant conditioning and two-down, one-up, adaptive tracking procedures. Kainic acid reduced gross AN potentials by 40%–70% across animals without impacting otoacoustic emissions. TIN thresholds in control animals decreased with increasing frequency and showed minimal elevation (<1 dB) when sound level was roved ±10 dB across trials. TIN thresholds in kainic-acid exposed animals were as sensitive as in the control group and showed similar preservation with roving sound level. These results suggest a minimal impact of AN loss on behavioral TIN detection, even under conditions requiring rapid adaptation to changing sound level.