This study compared modulation benefit for phoneme recognition obtained by normal-hearing (NH) and aided hearing-impaired (HI) listeners. Consonant and vowel recognition scores were measured using nonsense syllables in the presence of a steady-state noise and four vocoded speech maskers. Vocoded maskers were generated by modulating the steady-state noise, in either one or six frequency channels, with the speech envelope extracted from the speech of either a single talker or a four-talker babble. Aided HI listeners obtained lower consonant recognition scores than NH listeners in all masker conditions. Vowel recognition scores for aided HI listeners were comparable to NH scores, except in the six-channel vocoded masker conditions where they were relatively lower. Analysis using the extended speech intelligibility index developed by Rhebergen, Versfeld, and Dreschler [(2006). J. Acoust. Soc. Am. 120(6), 3988-3997] suggested that the signal-to-noise ratio deficit observed in aided HI listeners was largely due to uncompensated audibility loss. There was no significant difference between modulation masking release obtained by NH and aided HI listeners for both consonant and vowel recognition.