Two interleaved melodies, with theory tones alternating as ABAB..., can be individually followed and identified if auditory stream segregation takes place. Stream segregation can occur if the tone conditions are favorable, for example, if the tones of the different melodies are in different octaves. Using an interleaved melody identification task, we have measured the extent to which 12 different tone conditions lead to stream segregation. The purpose of the experiment is to discover whether stream segregation is mediated entirely by channeling that is established in the auditory periphery or whether more complicated principles of source grouping are at work. Peripheral channels are defined as either tonotopic (frequency based) or lateral (localized left or right). The data show that peripheral channeling is of paramount importance, suggesting that a set of rather simple rules can predict whether two interleaved melodies will be perceived as segregated or not. The data reveal a secondary effect of tone duration. Otherwise, in the absence of peripheral channeling, the experiments find little or no stream segregation, even in those cases where individual tones should clearly evoke images of different sources. Additional experiments show that interleaved melody identification is made more difficult by a transposition that maximizes the number of melodic crossings, even though the transposition may place the interleaved melodies in different keys. An appendix develops an elementary mathematics of melodic crossings and contacts.