Batrachoidids, including the Lusitanian toadfish Halobatrachus didactylus, have become good models for studying acoustic communication as they are unusual strongly vocal species and rely on their hearing abilities to find mates during the breeding season. The major goals of this ongoing study are (1) to verify whether the hearing sensitivity of the Lusitanian toadfish is well adapted to detect its complex acoustic repertoire and (2) to investigate the encoding of conspecific sounds in the toadfish auditory system. Hearing sensitivity was measured based on potentials recorded from the inner ear saccule. Responses to conspecific sounds were evaluated with the auditory evoked potentials (AEP) recording technique. Both experiments were performed in reproductive males and females. Saccular potentials of the toadfish were evoked greatest at twice the stimulus frequency. Saccular hair cells of both males and females were most sensitive at frequencies between 15 Hz (lowest frequency measured) and 205 Hz, where thresholds were below 118 dB re. 1·µPa. Auditory thresholds increased towards higher frequencies. AEP recordings revealed that males and females are capable of resolving temporal patterns, amplitude fluctuations and frequency content of agonistic and mating calls. Our results suggest that the auditory system of the Lusitanian toadfish is well suited to detect fine features of vocalizations which might be important for acoustic communication and orientation, especially during mate attraction and territorial defence. This study was supported by MCTES, Portugal.