Few studies exist on the perception; measurement of nonlinear distortion in headphones. This paper reports the detection thresholds; perceived sound quality from real distortion in headphones. Five different distortion measurements were made on the headphones to determine how well they predict audibility; quality. Music samples were binaurally recorded on six headphones at playback levels ranging from 85 to +110 dBA at 3 dB increments. The recordings were reproduced at a normal playback level (83 dBA) through a reference headphone with low distortion. The headphone recordings were post-processed to remove both level; frequency response differences so only nonlinear distortions; residual noise remained. In a second test, listeners rated the similarity in quality of headphones relative to an undistorted reference; a hidden version of it. The results provide evidence audible distortion in headphones with music occurs at significantly higher playback levels (104 to 112 dBA SPL) than what is considered typical; safe. The percentage of measured THD in the headphone had the highest correlation with the detection thresholds while the non-coherent distortion with music best predicted the similarity ratings. We discuss the results; the practical implications they might have on future headphone design, testing; measurement.