It has been reported that normal-hearing Chinese speakers base their lexical tone recognition on fine structure regardless of temporal envelope cues. However, a few psychoacoustic and perceptual studies have demonstrated that listeners with sensorineural hearing impairment may have an impaired ability to use fine structure information, whereas their ability to use temporal envelope information is close to normal. The purpose of this study is to investigate the relative contributions of temporal envelope and fine structure cues to lexical tone recognition in normal-hearing and hearing-impaired native Mandarin Chinese speakers. Twenty-two normal-hearing subjects and 31 subjects with various degrees of sensorineural hearing loss participated in the study. Sixteen sets of Mandarin monosyllables with four tone patterns for each were processed through a "chimeric synthesizer" in which temporal envelope from a monosyllabic word of one tone was paired with fine structure from the same monosyllable of other tones. The chimeric tokens were generated in the three channel conditions (4, 8, and 16 channels). Results showed that differences in tone responses among the three channel conditions were minor. On average, 90.9%, 70.9%, 57.5%, and 38.2% of tone responses were consistent with fine structure for normal-hearing, moderate, moderate to severe, and severely hearing-impaired groups respectively, whereas 6.8%, 21.1%, 31.4%, and 44.7% of tone responses were consistent with temporal envelope cues for the above-mentioned groups. Tone responses that were consistent neither with temporal envelope nor fine structure had averages of 2.3%, 8.0%, 11.1%, and 17.1% for the above-mentioned groups of subjects. Pure-tone average thresholds were negatively correlated with tone responses that were consistent with fine structure, but were positively correlated with tone responses that were based on the temporal envelope cues. Consistent with the idea that the spectral resolvability is responsible for fine structure coding, these results demonstrated that, as hearing loss becomes more severe, lexical tone recognition relies increasingly on temporal envelope rather than fine structure cues due to the widened auditory filters.