The hippocampus is well known to be involved in memory, as well as in perceptual processing. To date, the electrophysiological process by which unilateral hippocampal lesions, such as hippocampal sclerosis (HS), modulate the auditory processing remains unknown. Auditory-evoked magnetic fields (AEFs) are valuable for evaluating auditory functions, because M100, a major component of AEFs, originates from auditory areas. Therefore, AEFs of mesial temporal lobe epilepsy (mTLE, n=17) with unilateral HS were compared with those of healthy (HC, n=17) and disease controls (n=9), thereby determining whether AEFs were indicative of hippocampal influences on the auditory processing. Monaural tone-burst stimuli were presented for each side, followed by analysis of M100 and a previously less characterized exogenous component (M400: 300–500ms). The frequency of acceptable M100 dipoles was significantly decreased in the HS side. Beam-forming-based source localization analysis also showed decreased activity of the auditory area, which corresponded to the inadequately estimated dipoles. M400 was found to be related to the medial temporal structure on the HS side. Volumetric analysis was also performed, focusing on the auditory-related areas (planum temporale, Heschl's gyrus, and superior temporal gyrus), as well as the hippocampus. M100 amplitudes positively correlated with hippocampal and planum temporale volumes in the HC group, whereas they negatively correlated with Heschl's gyrus volume in the mTLE group. Interestingly, significantly enhanced M400 component was observed in the HS side of the mTLE patients. In addition, the M400 component positively correlated with Heschl's gyrus volume and tended to positively correlate with disease duration. M400 was markedly diminished after hippocampal resection. Although volumetric analysis showed decreased hippocampal volume in the HS side, the planum temporale and Heschl's gyrus, the two major sources of M100, were preserved. These results suggested that HS significantly influenced AEFs. Therefore, we concluded that the hippocampus modulates auditory processing differently under normal conditions and in HS.