In nature, communication sounds among animal species including humans are typical complex sounds that occur in sequence and vary with time in several parameters including amplitude, frequency, duration as well as separation, and order of individual sounds. Among these multiple parameters, sound duration is a simple but important one that contributes to the distinct spectral and temporal attributes of individual biological sounds. Likewise, the separation of individual sounds is an important temporal attribute that determines an animal's ability in distinguishing individual sounds. Whereas duration selectivity of auditory neurons underlies an animal's ability in recognition of sound duration, the recovery cycle of auditory neurons determines a neuron's ability in responding to closely spaced sound pulses and therefore, it underlies the animal's ability in analyzing the order of individual sounds. Since the multiple parameters of naturally occurring communication sounds vary with time, the analysis of a specific sound parameter by an animal would be inevitably affected by other co-varying sound parameters. This is particularly obvious in insectivorous bats, which rely on analysis of returning echoes for prey capture when they systematically vary the multiple pulse parameters throughout a target approach sequence. In this review article, we present our studies of dynamic variation of duration selectivity and recovery cycle of neurons in the central nucleus of the inferior colliculus of the frequency-modulated bats to highlight the dynamic temporal signal processing of central auditory neurons. These studies use single pulses and three biologically relevant pulse-echo (P-E) pairs with varied duration, gap, and amplitude difference similar to that occurring during search, approach, and terminal phases of hunting by bats. These studies show that most collicular neurons respond maximally to a best tuned sound duration (BD). The sound duration to which these neurons are tuned correspond closely to the behaviorally relevant sounds occurring at different phases of hunting. The duration selectivity of these collicular neurons progressively increases with decrease in the duration of pulse and echo, P-E gap, and P-E amplitude difference. GABAergic inhibition plays an important role in shaping the duration selectivity of these collicular neurons. The duration selectivity of these neurons is systematically organized along the tonotopic axis of the inferior colliculus and is closely correlated with the graded spatial distribution of GABAA receptors. Duration-selective collicular neurons have a wide range of recovery cycle covering the P-E intervals occurring throughout the entire target approaching sequences. Collicular neurons with low best frequency and short BD recover rapidly when stimulated with P-E pairs with short duration and small P-E amplitude difference, whereas neurons with high best frequency and long BD recover rapidly when stimulated with P-E pairs with long duration and large P-E amplitude difference. This dynamic variation of echo duration selectivity and recovery cycle of collicular neurons may serve as the neural basis underlying successful hunting by bats. Conceivably, high best frequency neurons with long BD would be suitable for echo recognition during search and approach phases of hunting when the returning echoes are high in frequency, large in P-E amplitude difference, long in duration but low in repetition rate. Conversely, low best frequency neurons with shorter BD and sharper duration selectivity would be suitable for echo recognition during the terminal phase of hunting when the highly repetitive echoes are low in frequency, small in P-E amplitude difference, and short in duration. Furthermore, the tonotopically organized duration selectivity would make it possible to facilitate the recruitment of different groups of collicular neurons along the tonotopic axis for effective processing of the returning echoes throughout the entire course of hunting.