The brain faces the challenging task of preserving a consistent portrayal of the external world in the face of disruptive sensory inputs. What alterations occur in sensory representation amidst noise, and how does brain activity adapt to it? Although it has previously been shown that background white noise (WN) decreases responses to salient sounds, a mechanistic understanding of the brain processes responsible for such changes is lacking. We investigated the effect of background WN on neuronal spiking activity, membrane potential, and network oscillations in the mouse central auditory system. We found that, in addition to increasing background spiking activity in the auditory cortex and thalamus, background WN decreases neural activity fluctuations, as reflected in the membrane potential of single neurons and the local field potential. Blocking acetylcholine signaling in the auditory cortex eliminated the WN-dependent increase in background activity as well as the shift in slow-wave oscillations. Together, our observations show that background WN is not filtered away along the auditory pathway, but rather drives sustained changes in cortical activity that can be reverted by blocking cholinergic inputs.