Dynamic aspects of cochlear mechanical compression were studied by recording basilar membrane (BM) vibrations evoked by tone pairs ("beat stimuli") in the 11-19 kHz region of the gerbil cochlea. The frequencies of the stimulus components were varied to produce a range of "beat rates" at or near the characteristic frequency (CF) of the BM site under study, and the amplitudes of the components were balanced to produce near perfect periodic cancellations, visible as sharp notches in the envelope of the BM response. We found a compressive relation between instantaneous stimulus intensity and BM response magnitude that was strongest at low beat rates (e.g., 10 - 100 Hz). At higher beat rates, the amount of compression reduced progressively (i.e. the responses became linearized), and the rising and falling flanks of the response envelope showed increasing amounts of hysteresis; the rising flank becoming steeper than the falling flank. This hysteresis indicates that cochlear mechanical compression is not instantaneous, and is suggestive of a gain control mechanism having finite attack and release times. In gain control terms, the linearization that occurs at higher beat rates occurs because the instantaneous gain becomes smoothened, or low-pass filtered, with respect to the magnitude fluctuations in the stimulus. In terms of peripheral processing, the linearization corresponds to an enhanced coding, or decompresssion, of rapid amplitude modulations. These findings are relevant both to those who wish to understand the underlying mechanisms and those who need a realistic model of nonlinear processing by the auditory periphery.