This study investigates how listeners cope with gradient forms of deletion of word-final /t/ when recognising words in a phonological context that makes /t/-deletion viable. A corpus study confirmed a high incidence of /t/-deletion in an /st#b/ context in Dutch. A discrimination study showed that differences between released /t/, unreleased /t/ and fully deleted /t/ in this specific /st#b/ context were salient. Two on-line experiments were carried out to investigate whether lexical activation might be affected by this form variation. Even though unreleased and released variants were processed equally fast by listeners, a detailed analysis of the unreleased condition provided evidence for gradient activation. Activating a target ending in /t/ is slowest for the most reduced variant because phonological context has to be taken into account. Importantly, activation for a target with /t/ in the absence of cues for /t/ is reduced if there is a surface-matching lexical competitor.