Animals that use echolocation (biosonar) listen to acoustic signals with a large range of intensities, because echo levels vary with the fourth power of the animal’s distance to the target. In man-made sonar, engineers apply automatic gain control to stabilize the echo energy levels, thereby rendering them independent of distance to the target. Both toothed whales and bats vary the level of their echolocation clicks to compensate for the distance-related energy loss. By monitoring the auditory brainstem response (ABR) during a psychophysical task, we found that a harbour porpoise (Phocoena phocoena), in addition to adjusting the sound level of the outgoing signals up to 5.4 dB, also reduces its ABR threshold by 6 dB when the target distance doubles. This self-induced threshold shift increases the dynamic range of the biosonar system and compensates for half of the variation of energy that is caused by changes in the distance to the target. In combination with an increased source level as a function of target range, this helps the porpoise to maintain a stable echo-evoked ABR amplitude irrespective of target range, and is therefore probably an important tool enabling porpoises to efficiently analyse and classify received echoes.