Children begin to talk at about age one. The vocabulary they need to do so must be built on perceptual evidence and, indeed, infants begin to recognize spoken words long before they talk. Most of the utterances infants hear, however, are continuous, without pauses between words, so constructing a vocabulary requires them to decompose continuous speech in order to extract the individual words. Here, we present electrophysiological evidence that 10-month-old infants recognize two-syllable words they have previously heard only in isolation when these words are presented anew in continuous speech. Moreover, they only need roughly the first syllable of the word to begin doing this. Thus, prelinguistic infants command a highly efficient procedure for segmentation and recognition of spoken words in the absence of an existing vocabulary, allowing them to tackle effectively the problem of bootstrapping a lexicon out of the highly variable, continuous speech signals in their environment.