Averaged and single sweep auditory event-related potentials (ERPs) were analysed in the time and frequency domain to demonstrate a dynamic, functional relationship between prestimulus EEG activity and poststimulus ERP changes. Evidence is presented of prestimulus "preparation changes" which were elicited by the presentation of regular, frequent target tones. The development of preparation changes was associated with prestimulus EEG synchronisation, frequency selective phase alignment at the point of stimulation and a greater predictability of the poststimulus response to target and nontarget tones. Time varying responses to target and nontarget tones are described for different experimental conditions and related to preparation rhythms. The mechanisms and possible neural correlates of the endogenous P300 change are discussed. The findings from this study and other relevant investigations have been used to formulate hypotheses about the relationships among preparation changes, ERPs and short-term memory, habituation and learning.