Listeners use lexical knowledge to judge what speech sounds they heard. I investigated whether such lexical influences are truly top-down or just reflect a merging of perceptual and lexical constraints. This is achieved by testing whether the lexically determined identity of a phone exerts the appropriate context effects on surrounding phones. The current investigations focuses on compensation for coarticulation in vowel-fricative sequences, where the presence of a rounded vowel (/y/ rather than /i/) leads fricatives to be perceived as /s/ rather than //. This results was consistently found in all three experiments. A vowel was also more likely to be perceived as rounded /y/ if that lead listeners to be perceive words rather than nonwords (Dutch: meny, English id. vs. meni nonword). This lexical influence on the perception of the vowel had, however, no consistent influence on the perception of following fricative.