Deficits in auditory nerve (AN) function for older adults reduce afferent input to the cortex. The extent to which the cortex in older adults adapts to this loss of afferent input and the mechanisms underlying this adaptation are not well understood. We took a neural systems approach measuring AN and cortical evoked responses within 50 older and 27 younger human adults (59 female) to estimate central gain or increased cortical activity despite reduced AN activity. Relative to younger adults, older adults' AN response amplitudes were smaller, but cortical responses were not. We used the relationship between AN and cortical response amplitudes in younger adults to predict cortical response amplitudes for older adults from their AN responses. Central gain in older adults was thus defined as the difference between their observed cortical responses and those predicted from the parameter estimates of younger adults. In older adults, decreased afferent input contributed to lower cortical GABA levels, greater central gain, and poorer speech recognition in noise (SIN). These effects on SIN occur in addition to, and independent from, effects attributed to elevated hearing thresholds. Our results are consistent with animal models of central gain and suggest that reduced AN afferent input in some older adults may result in changes in cortical encoding and inhibitory neurotransmission, which contribute to reduced SIN. An advancement in our understanding of the changes that occur throughout the auditory system in response to the gradual loss of input with increasing age may provide potential therapeutic targets for intervention. Age-related hearing loss is one of the most common chronic conditions of aging, yet little is known about how the cortex adapts to this loss of sensory input. We measured AN and cortical responses to the same stimulus in younger and older adults. In older adults we found hyperexcitability in cortical activity relative to concomitant declines in afferent input that are consistent with central gain. Lower levels of cortical GABA, an inhibitory neurotransmitter, were associated with greater central gain, which predicted poorer SIN. The results suggest that the cortex in older adults may adapt to attenuated sensory input by reducing inhibition to amplify the cortical response, but this amplification may lead to poorer SIN.