The present study was aimed at investigating the relationship between the mismatch negativity (MMN) and psychoacoustical effects of sequential streaming on comodulation masking release (CMR). The influence of sequential streaming on CMR was investigated using a psychoacoustical alternative forced-choice procedure and electroencephalography (EEG) for the same group of subjects. The psychoacoustical data showed, that adding precursors comprising of only off-signal-frequency maskers abolished the CMR. Complementary EEG data showed an MMN irrespective of the masker envelope correlation across frequency when only the off-signal-frequency masker components were present. The addition of such precursors promotes a separation of the on- and off-frequency masker components into distinct auditory objects preventing the auditory system from using comodulation as an additional cue. A frequency-specific adaptation changing the representation of the flanking bands in the streaming conditions may also contribute to the reduction of CMR in the stream conditions, however, it is unlikely that adaptation is the primary reason for the streaming effect. A neurophysiological correlate of sequential streaming was found in EEG data using MMN, but the magnitude of the MMN was not correlated with the audibility of the signal in CMR experiments. Dipole source analysis indicated different cortical regions involved in processing auditory streaming and modulation detection. In particular, neural sources for processing auditory streaming include cortical regions involved in decision-making.