This study examines the role of neural inhibition in auditory spatial selectivity of inferior collicular neurons of the big brown bat, Eptesicus fuscus, using a two-tone inhibition paradigm. Two-tone inhibition decreases auditory spatial response areas but increases the slopes of directional sensitivity curves of inferior collicular neurons. Inferior collicular neurons have either directionally-selective or hemifield directional sensitivity curves. A directionally-selective curve always has a peak which is at least 50% larger than the minimum. A hemifield directional sensitivity curve rises from an ipsilateral angle by more than 50% and either reaches a plateau or declines by less than 50% over a range of contralateral angles. Two-tone inhibition does not change directionally-selective curves but changes most hemifield directional sensitivity curves into directionally-selective curves. Auditory spatial selectivity determined both with and without two-tone inhibition increases with increasing best-excitatory frequency. Sharpening of auditory spatial selectivity by two-tone inhibition is larger for neurons with smaller differences between excitatory and inhibitory best frequencies. The effect of two-tone inhibition on auditory spatial selectivity increases with increasing inhibitory tone intensity but decreases with increasing intertone interval. The implications of these findings in bat echolocation are discussed.