We examined the relationship between cognitive-linguistic mechanisms and auditory closure ability in children. Sixty-seven school-age children recognized isolated words and keywords in sentences that were interrupted at a rate of 2.5 Hz and 5 Hz. In essence, children were given only 50% of speech information and asked to repeat the complete word or sentence. Children's working memory capacity (WMC), attention, lexical knowledge, and retrieval from long-term memory (LTM) abilities were also measured to model their role in auditory closure ability. Overall, recognition of monosyllabic words and lexically easy multisyllabic words was significantly better at 2.5 Hz interruption rate than 5 Hz. Recognition of lexically hard multisyllabic words and keywords in sentences was better at 5 Hz relative to 2.5 Hz. Based on the best fit generalized "logistic" linear mixed effects models, there was a significant interaction between WMC and lexical difficulty of words. WMC was positively related only to recognition of lexically easy words. Lexical knowledge was found to be crucial for recognition of words and sentences, regardless of interruption rate. In addition, LTM retrieval ability was significantly associated with sentence recognition. These results suggest that lexical knowledge and the ability to retrieve information from LTM is crucial for children's speech recognition in adverse listening situations. Study findings make a compelling case for the assessment and intervention of lexical knowledge and retrieval abilities in children with listening difficulties.