Deficits in parsing concurrent auditory events are believed to contribute to older adults' difficulties in understanding speech in adverse listening conditions (e.g., cocktail party). To explore the level at which aging impairs sound segregation, we measured auditory evoked fields (AEFs) using magnetoencephalography while young, middle-aged, and older adults were presented with complex sounds that either had all of their harmonics in tune or had the third harmonic mistuned by 4 or 16% of its original value. During the recording, participants were asked to ignore the stimuli and watch a muted subtitled movie of their choice. For each participant, the AEFs were modeled with a pair of dipoles in the superior temporal plane, and the effects of age and mistuning were examined on the amplitude and latency of the resulting source waveforms. Mistuned stimuli generated an early positivity (60-100 ms), an object-related negativity (ORN) (140-180 ms) that overlapped the N1 and P2 waves, and a positive displacement that peaked at approximately 230 ms (P230) after sound onset. The early mistuning-related enhancement was similar in all three age groups, whereas the subsequent modulations (ORN and P230) were reduced in older adults. These age differences in auditory cortical activity were associated with a reduced likelihood of hearing two sounds as a function of mistuning. The results reveal that inharmonicity is rapidly and automatically registered in all three age groups but that the perception of concurrent sounds declines with age.