A principal cue for sound source localization is the difference in arrival times of sounds at an animal's two ears (interaural time difference, ITD). Neurons that process ITDs are specialized to compare the timing of inputs with submillisecond precision. In the barn owl, ITD processing begins in the nucleus laminaris (NL) region of the auditory brain stem. Remarkably, NL neurons are sensitive to ITDs in high-frequency sounds (kilohertz-range). This contrasts with ITD-based sound localization in analogous regions in mammals where ITD sensitivity is typically restricted to lower-frequency sounds. Guided by previous experiments and modeling studies of tone-evoked responses of NL neurons, we propose NL neurons achieve high-frequency ITD sensitivity if they respond selectively to the small-amplitude, high-frequency oscillations in their inputs, and remain relatively non-responsive to mean input level. We use a biophysically based model to study the effects of soma-axon coupling on dynamics and function in NL neurons. First, we show that electrical separation of the soma from the axon region in the neuron enhances high-frequency ITD sensitivity. This soma-axon coupling configuration promotes linear subthreshold dynamics and rapid spike initiation, making the model more responsive to input oscillations, rather than mean input level. Second, we provide new evidence for the essential role of phasic dynamics for high-frequency neural coincidence detection. Transforming our model to the phasic firing mode further tunes the model to respond selectively to the oscillating inputs that carry ITD information. Similar structural and dynamical mechanisms specialize mammalian auditory brain stem neurons for ITD sensitivity, and thus, our work identifies common principles of ITD processing and neural coincidence detection across species and for sounds at widely different frequencies.