A distributed call progress tone detection system and method of operation thereof. In one embodiment, the system includes a switching partition having line interface modules, a call progress tone detector configured to perform call progress tone detection analysis, and an input-output distributor configured to employ a circuit to interconnect the call progress tone detector and a first of the line interface modules. The system further includes a main control unit configured to receive requests from an application over a packet network, transmit call and control processing commands to the switching partition, create an interconnection between the first of the line interface modules and a second of the line interface modules based on an indication generated by the call progress tone detector and notify the application of the interconnection.