One of the primary challenges that sensory systems face is extracting relevant information from background noise. In the auditory system, the ear receives efferent feedback, which may help it extract signals from noise. Here we directly test the hypothesis that efferent activity increases the signal-to-noise ratio (SNR) of the ear, using the relatively simple teleost ear. Tone-evoked saccular potentials were recorded before and after efferent stimulation, and the SNR of the responses was calculated. In quiet conditions, efferent stimulation suppressed saccular responses to a tone, reducing the SNR. However, when masking noise was added, efferent stimulation increased the SNR of the saccular responses within a range of stimulus combinations. These data demonstrate that auditory efferent feedback can increase SNR in conditions where a signal is masked by noise, thereby enhancing the encoding of signals in noise. Efferent feedback thus performs a fundamental signal processing function, helping the animal to hear sounds in difficult listening conditions.