Summary: The human hearing system is the most robust speech processor despite noisy environments. This work presents a new computational model for our auditory system by exploring the psychoacoustical masking properties. The model is then applied to speech coding in the perceptual domain. The coding algorithm is capable of producing high quality coded speech and audio, which account for temporal as well as spectral details. The proposed filter bank is also applied to speech denoising in the perceptual domain. The enhanced speech is of good perceptual quality.