Perceptual segregation of multiple sounds, which overlap in both time and spectra, into individual auditory streams is critical for hearing in natural environments. Some cues such as interaural time disparities (ITDs) play an important role in the segregation, especially when sounds are separated in space. In this study, we investigated the neural representation of two uncorrelated narrowband noises that shared the identical spectrum in the rat inferior colliculus (IC) using frequency-following-response (FFR) recordings, when the ITD for each noise stimulus was manipulated. The results of this study showed that recorded FFRs exhibited two distinctive components: the fast-varying temporal fine structure (TFS) component (FFRTFS) and the slow-varying envelope component (FFRENV). When a single narrowband noise was presented alone, the FFRTFS, but not the FFRENV, was sensitive to ITDs. When two narrowband noises were presented simultaneously, the FFRTFS took advantage of the ITD disparity that was associated with perceived spatial separation between the two concurrent sounds, and displayed a better linear synchronization to the sound with an ipsilateral-leading ITD. However, no effects of ITDs were found on the FFRENV. These results suggest that the FFRTFS and FFRENV represent two distinct types of signal processing in the auditory brainstem and contribute differentially to sound segregation based on spatial cues: the FFRTFS is more critical to spatial release from masking.