The interaction between auditory and visual speech streams is a seamless and surprisingly effective process. An intriguing example is the “McGurk effect”: The acoustic syllable /ba/ presented simultaneously with a mouth articulating /ga/ is typically heard as /da/ [McGurk, H., & MacDonald, J. Hearing lips and seeing voices. Nature, 264, 746–748, 1976]. Previous studies have demonstrated the interaction of auditory and visual streams at the auditory cortex level, but the importance of these interactions for the qualitative perception change remained unclear because the change could result from interactions at higher processing levels as well. In our electroencephalogram experiment, we combined the McGurk effect with mismatch negativity (MMN), a response that is elicited in the auditory cortex at a latency of 100–250 msec by any above-threshold change in a sequence of repetitive sounds. An “odd-ball” sequence of acoustic stimuli consisting of frequent /va/ syllables (standards) and infrequent /ba/ syllables (deviants) was presented to 11 participants. Deviant stimuli in the unisensory acoustic stimulus sequence elicited a typical MMN, reflecting discrimination of acoustic features in the auditory cortex. When the acoustic stimuli were dubbed onto a video of a mouth constantly articulating /va/, the deviant acoustic /ba/ was heard as /va/ due to the McGurk effect and was indistinguishable from the standards. Importantly, such deviants did not elicit MMN, indicating that the auditory cortex failed to discriminate between the acoustic stimuli. Our findings show that visual stream can qualitatively change the auditory percept at the auditory cortex level, profoundly influencing the auditory cortex mechanisms underlying early sound discrimination.