1. Environmental noise from anthropogenic and other sources affects many aspects of animal ecology and behaviour, including acoustic communication. Acoustic masking is often assumed in field studies to be the cause of compromised communication in noise, but other mechanisms could have similar effects. 2. We tested experimentally how background noise disrupted the response to conspecific alarm calls in wild superb fairy-wrens, Malurus cyaneus, assessing the effects of acoustic masking, distraction and changes in vigilance. We first examined the birds’ response to alarm-call playbacks accompanied by different amplitudes of background noise that overlapped the calls in acoustic frequency. We then scored and videoed their response to alarm calls in two types of background noise, that did or did not overlap call frequency, but were broadcast at a constant amplitude. 3. Birds were less likely to flee to alarm calls in higher amplitudes of overlapping noise, demonstrating that noise itself compromised communication independently of environmental correlates. Background noise affected the response only if it overlapped in frequency with the alarm calls, implying that the effect was not due to distraction. Further, birds were equally vigilant during background noise of overlapping or non-overlapping frequency, indicating that the lack of response to alarm calls in overlapping noise was not due to enhanced vigilance and awareness that there was no predator. 4. We conclude that alarm-call reception was compromised by masking, a mechanism that is often assumed but rarely tested in an ecological context. Masking compromised reception of high-frequency ‘aerial’ alarm calls and so could reduce survival in background noise of similar frequency. While anthropogenic noise, which is often of lower frequency, is unlikely to affect communication with these calls, it could affect reception of acoustic cues of danger, or other conspecific or heterospecific alarm calls.