The perception of acoustic and phonological information in lexical tones is crucial for understanding Chinese words correctly. Research in the past has considered the linguistic functions of both acoustic and phonological information. However, it has been debated whether Chinese lexical tones are processed in the right or the left hemisphere, and whether different types of information may be handled differently in the two hemispheres. For native Chinese speakers (L1), the acoustic information of tones appears to be processed in the right hemisphere, whereas the phonological information of tones is mostly processed in the left hemisphere. For second language (L2) Chinese learners, it has been hypothesized that they may show right-lateralized pattern for processing both acoustic and phonological information at the early stage of Chinese learning; when their processing of these two types of information improves to a higher level at a later stage of Chinese learning, native-like patterns emerge. In this chapter, we discuss how these two types of information play their roles in the processing of lexical tones in Chinese by both native speakers and second language learners of Chinese.