A multi-channel signal processing system adapted to provide binaural compressing of tonal inputs is provided. Such a system can be used, for example, in a binaural hearing aid system to provide the dynamic-range binaural compression of the tonal inputs. The multi-channel signal processing system is essentially a system with two signal channels connected by a control link between the two signal channels, thereby allowing the binaural hearing aid system to model behaviors, such as crossed olivocochlear bundle (COCB) effects, of the human auditory system that includes a neural link between the left and right ears. The multi-channel signal processing system comprises first and second channel compressing units respectively located in first and second signal channels of the multi-channel signal processing system. The first and second channel compressing units receive first and second channel input signals, respectively, to generate first and second channel compressed outputs. The multi-channel signal processing system further includes peak detecting means detecting signal peaks of the first and second channel input signals for generating first and second channel control signals. Thereafter, gain adjusting means adjusts signal gains of the first and second channel control signals. The first and second channel compressing units then respectively compress the first and second channel input signals to produce the first and second channel compressed outputs in accordance with the adjusted first and second channel control signals, respectively.