This psychoacoustic study provides behavioral evidence that neural entrainment in the theta range (3-9 Hz) causally shapes speech perception. Adopting the ‘rate normalization’ paradigm (presenting compressed carrier sentences followed by uncompressed target words), we show that uniform compression of a speech carrier to syllable rates inside the theta range influences perception of subsequent uncompressed targets, but compression outside theta range does not. However, the influence of carriers – compressed outside theta range – on target perception is salvaged when carriers are ‘repackaged’ to have a packet rate inside theta. This suggests that the brain can only successfully entrain to syllable/packet rates within theta range, with a causal influence on the perception of subsequent speech, in line with recent neuroimaging data. Thus, this study points to a central role for sustained theta entrainment in rate normalization and contributes to our understanding of the functional role of brain oscillations in speech perception.