Instrumental music performance is associated with enhanced perceptual processing as evidenced by auditory discrimination and speech-in-noise perception. However, little is known about the extent to which auditory perceptual processes support cognition in aging. We investigated whether music training enhances precision in perception in 26 older amateur and professional musicians (62–85 years, 13 females) and 25 older non-musicians (61–82 years, 16 females). Participants completed a novel paradigm of auditory mnemonic discrimination while electroencephalography (EEG) was recorded. The mismatch negativity (MMN), an event-related potential of change detection, was measured during a passive auditory oddball paradigm with standard and deviant pure-tone sequences differing in pitch contour. Participants subsequently completed an incidental memory test for oddball stimuli (i.e., targets) amongst similar lure sequences (matched for frequency but differing in contour) and dissimilar foil sequences (differing in frequency and contour), as well as a back-to-back perceptual discrimination task. Musicians showed enhanced amplitudes, left-lateralized source activity of the MMN, and increased memory discriminability for targets compared to lures and foils, which was not explained by perceptual discrimination ability or MMN amplitude. No group differences were found for neural or behavioural measures on a mnemonic discrimination task for visual everyday objects. Our results clarify the role of music training on precision in perception and auditory memory in older adult musicians compared to non-musicians. Our findings underscore the contribution of musical engagement to perception and memory to the development of cognitive reserve in aging.