This study provides evidence for the role of semantic composition in compound word processing. We examined the online processing of isolated two meaning unit compounds in Chinese, a language that uses compounding to ‘disambiguate’ meaning. Using auditory presentation, we manipulated the semantic meaning and syntactic category of the two meaning units forming a compound. Event-related brain potential-recordings revealed a significant influence of semantic information, which was reflected in an N400 signature for compounds whose meaning differed from the constituent meanings. This finding suggests that the combination of distinct constituent meanings to form an overall compound meaning consumes processing resources. By contrast, no comparable difference was observed based on syntactic category information. Our findings indicate that combinatory semantic processing at the word level correlates with N400 effects.