Acoustic masking reduces the efficiency of communication, prey detection, and predator avoidance in marine mammals. Most underwater sounds fluctuate in amplitude. The ability of harbor porpoises (Phocoena phocoena) to detect sounds in amplitude-varying masking noise was examined. A psychophysical technique evaluated hearing thresholds of three harbor porpoises for 500–2000 ms tonal sweeps (3.9–4.1 kHz), presented concurrently with sinusoidal amplitude-modulated (SAM) or unmodulated Gaussian noise bands centered at 4 kHz. Masking was assessed in relation to signal duration and masker level, amplitude modulation rate (1, 2, 5, 10, 20, 40, 80, and 90 Hz), modulation depth (50%, 75%, and 100%) and bandwidth (1/3 or 1 octave). Masking release (MR) due to SAM was assessed by comparing thresholds in modulated and unmodulated maskers. Masked thresholds were affected by SAM rate with the lowest thresholds (i.e., largest MR was 14.5 dB) being observed for SAM rates between 1 and 5 Hz at higher masker levels. Increasing the signal duration from 500–2000 ms increased MR by 3.3 dB. Masker bandwidth and depth of modulation had no substantial effect on MR. The results are discussed with respect to MR resulting from envelope variation and the impact of noise in the environment.