The abundant research on lexical access in the last 30 years has shown that context effects such as lexical status, morphological complexity, and neighborhood density can affect word recognition. Very little research has investigated interactions between perceptual distinctiveness and context effects. This study used a spoken word recognition in noise experiment with German words and nonwords to research this interaction. Results showed a processing advantage for monomorphemic words over bimorphemic words, and that listeners are particularly sensitive to morphological information when presented with highly confusable stimuli.