Nerve paresthesia is a sensory impairment experienced in clinical conditions such as diabetes. Paresthesia may “mask” or “compete” with meaningful tactile information in the patient’s sensory environment. The two objectives of the present study were: (1) to determine if radiating paresthesia produces a peripheral mask, a central mask, or a combination; (2) to determine if a response competition experimental design reveals changes in somatosensory integration similar to a masking design. Experiment 1 assessed the degree of masking caused by induced radiating ulnar nerve paresthesia (a concurrent non-target stimulus) on a vibrotactile Morse code letter acquisition task using both behavioral and neurophysiological measures. Experiment 2 used a response competition design by moving the radiating paresthesia to the median nerve. This move shifted the concurrent non-target stimulus to a location spatially removed from the target stimuli. The task, behavioral and neurophysiological measures remained consistent. The induced paresthesia impacted letter acquisition differentially depending on the relative location of meaningful and non-meaningful stimulation. Paresthesia acted as a peripheral mask when presented to overlapping anatomical stimulation areas, and a central mask when presented at separate anatomical areas. These findings are discussed as they relate to masking, subcortical, and centripetal gating.