Current theories of spoken-word recognition posit two levels of representation and process: lexical and sublexical. By manipulating probabilistic phonotactics and similarity-neighborhood density, we attempted to determine if these two levels of representation have dissociable effects on processing. Whereas probabilistic phonotactics have been associated with facilitatory effects on recognition, increases in similarity-neighborhood density typically result in inhibitory effects on recognition arising from lexical competition. Our results demonstrated that when the lexical level is invoked using real words, competitive effects of neighborhood density are observed. However, when strong lexical effects are removed by the use of nonsense word stimuli, facilitatory effects of phonotactics emerge. These results are consistent with a two-level framework of process and representation embodied in certain current models of spoken-word recognition.