Birdsong is a complex vocal communication signal, and like humans, birds need to discriminate between similar sequences of sound with different meanings. The caudal mesopallium (CM) is a cortical-level auditory area implicated in song discrimination. CM neurons respond sparsely to conspecific song and are tolerant of production variability. Intracellular recordings in CM have identified a diversity of intrinsic membrane dynamics, which could contribute to the emergence of these higher-order functional properties. We investigated this hypothesis using a novel linear-dynamical cascade model that incorporated detailed biophysical dynamics to simulate auditory responses to birdsong. Neuron models that included a low-threshold potassium current present in a subset of CM neurons showed increased selectivity and coding efficiency relative to models without this current. These results demonstrate the impact of intrinsic dynamics on sensory coding and the importance of including the biophysical characteristics of neural populations in simulation studies.