Recent work (Vitevitch & Luce, 1998) investigating the role of phonotactic information in spoken word recognition suggests the operation of two levels of representation, each having distinctly different consequences for processing. The lexical level is marked by competitive effects associated with similarity neighborhood activation, whereas increased probabilities of segments and sequences of segments facilitate processing at the sublexical level. We investigated the two proposed levels in six experiments using monosyllabic and specially constructed bisyllabic words and nonwords. The results of these studies provide further support for the hypothesis that the processing of spoken stimuli is a function of both facilitatory effects associated with increased phonotactic probabilities and competitive effects associated with the activation of similarity neighborhoods. We interpret these findings in the context of Grossberg, Boardman, and Cohen's (1997) adaptive resonance theory of speech perception.