An automatic gain control unit controls the gain applied to an input signal produced by a microphone subject to ambient noise. The automatic gain control circuit continually monitors the signal level of said input signal. A first gain control circuit decreases the gain applied to the input signal in increments of a first size when the input signal exceeds a first predetermined level. A second gain control circuit increases the gain applied to said input signal in increments of a smaller size when the input signal falls below a second predetermined level and in response to the presence of a speech present signal. The second predetermined level is less than said first predetermined level. In one embodiment, the first gain control circuit controls the analog gain of a codec and the second gain control circuit controls the digital gain of the codec.