This study examined the effect of center frequency and level on the perceptual grouping of rapid tone sequences. The sequence ABA-ABA-...was used, where A and B represent sinusoidal tone bursts (10-ms rise/fall, 80-ms steady state, 20-ms interval between tones) and - represents a silent interval of 120 ms. In experiment 1, tone A was fixed in frequency at 62, 125, 250, 500, 1000, 2000, 4000, 6000, or 8000 Hz. Both tones had a level of approximately 40 dB SL. Tone B started with a frequency well above that of tone A, and its frequency was swept toward that of tone A so that the frequency separation between them decreased in an exponential manner. Subjects were required to indicate when they could no longer hear the tones A and B as two separate streams, but heard only a single stream with a "gallop" rhythm. This changeover point between percepts is called the fission boundary. The separation between tones A and B at the fission boundary was roughly independent of the frequency of tone A when expressed as the difference in number of equivalent rectangular bandwidths (ERBs) between A and B, but varied more with frequency when the difference was expressed in barks or cents. In experiment 2, the center frequency was fixed at 250, 1000, or 4000 Hz, and the level of the A and B tones was 40, 55, 70, or 85 dB SPL. The frequency separation of the A and B tones at the fission boundary tended to increase slightly with increasing level, in a manner consistent with the broadening of the auditory filter with increasing level. The results support the "peripheral channeling" explanation of stream segregation advanced by Hartmann and Johnson [Music Percept. 9, 155-184 (1991)], and indicate that the perception of fusion or fission in alternating-tone sequences depends partly upon the degree of overlap of the excitation patterns evoked by the successive sounds in the cochlea, as assumed in the theory of Beauvois and Meddis [J. Acoust. Soc. Am. 99, 2270-2280 (1996)].