When a tone burst is divided into two parts, an onset transient and a sustained tone smoothly fading on, and these parts are delivered to two stereophonic ally located loudspeakers in a room, a listener gains the impression that the whole sound is coming from the loudspeaker that actually emits merely the transient. Due to this auditory illusion known as the 'Franssen effect' (FE), the physical and the perceived lateralizations of the sustained sound become different. A two-block mismatch negativity (MMN) paradigm was used to investigate the stage of auditory processing at which this segregation would take place. In one block, standard stimuli were 100 ins, 1 kHz tone bursts emitted by one of the loudspeakers, and deviant stimuli were their split version, with the sustained part switched to the other loudspeaker. In the other block, the roles of the two stimuli were swapped. A room acoustics software was used for generating the signals to a headphone. The responses recorded from 10 subjects displayed no MMN, although the same stimuli but without the transients evoked prominent MMNs. This indicated that the mechanism underlying this illusion modifies the neural representation of the stimulus with FE in such a way that it becomes similar to that of the stimulus without FE before reaching the input of the preattentive mechanism indexed by the MMN. Considering the possible relationship of this illusion to the precedence effect and also the relevant electrophysiological findings in the literature, we conclude that the primary auditory cortex is the most plausible site of the mechanism leading to the FE. (c) 2006 Elsevier B.V. All rights reserved.