Underwater noise pollution is becoming a pressing environmental issue that could affect aquatic wildlife, but very little research has been done on this topic. The effect can be even more dramatic for species actively using acoustic signals for communication and assessment of quality of opponents during agonistic encounters. We examined the effects of underwater noise on auditory sensitivity and aggressive behaviour in the vocalising skunk loach Botia morleti. Fish were exposed to white noise (142 do re: 1 µPa) for 12 hours and shifts of auditory threshold were measured with the auditory brainstem response protocol. Noise exposure resulted in elevated auditory thresholds throughout the entire auditory range. It was also found that significant recovery occurred in approximately 9 hours. The effects of noise-exposure on behaviour during aggressive contests were investigated by comparing contest dynamics between noise-exposed fish and a resident (non-exposed fish). The results showed that noise-exposure could influence behaviour in two ways: 1) contest durations with noise-exposed fish were significantly shorter; and 2) noise-exposed fish tended to engage in more re-escalation of contests than those with control fish. Two mechanisms (direct, indirect) were proposed to explain the findings. In the direct effect, noise exposure causes direct stress on the fish which results in decreased contest duration. In the indirect effect, the noise exposure cause a temporary hearing loss which results in a misperception of the acoustic signal emitted by the opponents. The sound perception and production feedback loop is compromised due to noise exposure (i.e., elevation of hearing threshold) and as a result, contests are repeatedly re-escalated because the information content of the signal can not be accurately perceived by the noise-exposed fish. The present study demonstrates that noise pollution could have dire physiological impacts as well as behavioural consequences (supported by National Organization for Hearing Research, N1MH-58198, Institute of Museum and Library Service-LL90187).