Interaural time differences (ITDs) are the dominant cue for the localization of low-frequency sounds. While much is known about the processing of ITDs in the auditory brainstem and midbrain, there have been relatively few studies of ITD processing in auditory cortex. In this study, we compared the neural representation of ITDs in the inferior colliculus (IC) and primary auditory cortex (A1) of gerbils. Our IC results were largely consistent with previous studies, with most cells responding maximally to ITDs that correspond to the contralateral edge of the physiological range. In A1, however, we found that preferred ITDs were distributed evenly throughout the physiological range without any contralateral bias. This difference in the distribution of preferred ITDs in IC and A1 had a major impact on the coding of ITDs at the population level: while a labeled-line decoder that considered the tuning of individual cells performed well on both IC and A1 responses, a two-channel decoder based on the overall activity in each hemisphere performed poorly on A1 responses relative to either labeled-line decoding of A1 responses or two-channel decoding of IC responses. These results suggest that the neural representation of ITDs in gerbils is transformed from IC to A1 and have important implications for how spatial location may be combined with other acoustic features for the analysis of complex auditory scenes.