Although we usually have no trouble finding the right antecedent for a pronoun, the co-reference relations between pronouns and antecedents in everyday language are often ‘formally’ ambiguous. But a pronoun is only really ambiguous if a reader or listener indeed perceives it to be ambiguous. Whether this is the case may depend on at least two factors: the language processing skills of an individual reader, and the contextual bias towards one particular referential interpretation. In the current study, we used event related brain potentials (ERPs) to explore how both these factors affect the resolution of referentially ambiguous pronouns. We compared ERPs elicited by formally ambiguous and non-ambiguous pronouns that were embedded in simple sentences (e.g., “Jennifer Lopez told Madonna that she had too much money.”). Individual differences in language processing skills were assessed with the Reading Span task, while the contextual bias of each sentence (up to the critical pronoun) had been assessed in a referential cloze pretest. In line with earlier research, ambiguous pronouns elicited a sustained, frontal negative shift relative to non-ambiguous pronouns at the group-level. The size of this effect was correlated with Reading Span score, as well as with contextual bias. These results suggest that whether a reader perceives a formally ambiguous pronoun to be ambiguous is subtly co-determined by both individual language processing skills and contextual bias.