The mechanisms underlying the common association between autism spectrum disorders (ASD) and sensory processing disorders (SPD) are unclear, and treatment options to reduce atypical sensory processing are limited. Fragile X Syndrome (FXS) is a leading genetic cause of intellectual disability and ASD behaviors. As in most children with ASD, atypical sensory processing is a common symptom in FXS, frequently manifesting as sensory hypersensitivity. Auditory hypersensitivity is a highly debilitating condition in FXS that may lead to language delays, social anxiety and ritualized repetitive behaviors. Animal models of FXS, including knock out (KO) mouse, also show auditory hypersensitivity, providing a translation relevant platform to study underlying pathophysiological mechanisms. The focus of this review is to summarize recent studies in the KO mouse that identified neural correlates of auditory hypersensitivity. We review results of electroencephalography (EEG) recordings in the KO mice and highlight EEG phenotypes that are remarkably similar to EEG findings in humans with FXS. The EEG phenotypes associated with the loss of FMRP include enhanced resting EEG gamma band power, reduced cross frequency coupling, reduced sound-evoked synchrony of neural responses at gamma band frequencies, increased event-related potential amplitudes, reduced habituation of neural responses and increased non-phase locked power. In addition, we highlight the postnatal period when the EEG phenotypes develop and show a strong association of the phenotypes with enhanced matrix-metalloproteinase-9 (MMP-9) activity, abnormal development of parvalbumin (PV)-expressing inhibitory interneurons and reduced formation of specialized extracellular matrix structures called perineuronal nets (PNNs). Finally, we discuss how dysfunctions of inhibitory PV interneurons may contribute to cortical hyperexcitability and EEG abnormalities observed in FXS. Taken together, the studies reviewed here indicate that EEG recordings can be utilized in both pre-clinical studies and clinical trials, while at the same time, used to identify cellular and circuit mechanisms of dysfunction in FXS. New therapeutic approaches that reduce MMP-9 activity and restore functions of PV interneurons may succeed in reducing FXS sensory symptoms. Future studies should examine long-lasting benefits of developmental vs. adult interventions on sensory phenotypes.