Neurons in the auditory system respond to recent stimulus-level history by adapting their response functions according to the statistics of the stimulus, partially alleviating the so-called "dynamic-range problem." However, the mechanism and source of this adaptation along the auditory pathway remain unknown. Inclusion of power-law dynamics in a phenomenological model of the inner hair cell (IHC)-auditory nerve (AN) synapse successfully explained neural adaptation to sound-level statistics, including the time course of adaptation of the mean firing rate and changes in the dynamic range observed in AN responses. A direct comparison between model responses to a dynamic stimulus and to an "inversely gated" static background suggested that AN dynamic-range adaptation largely results from the adaptation produced by the response history. These results support the hypothesis that the potential mechanism underlying the dynamic-range adaptation observed at the level of the auditory nerve is located peripheral to the spike generation mechanism and central to the IHC receptor potential.