In two experiments, we investigated the relationship between semantics and phonology in the lexical decision task. In the first experiment, lexical decisions to words with large semantic neighborhoods were faster than those to words with sparse semantic neighborhoods. Conversely, this effect of semantic neighborhood was reversed for pseudohomophones (e.g., nale). That is, pseudohomophones based on words with large semantic neighborhoods took longer to reject than did those based on words with sparse semantic neighborhoods. In the second experiment, we found the magnitude of the semantic neighborhood effect for words to be a function of nonword foil type. Taken together, these results indicate that semantic neighborhood size affects processing of both words and pseudohomophones, and that the effect of semantic neighborhood size for words is more pronounced when pseudohomophone foils are employed. These effects are discussed in terms of a model in which the orthographic, phonological, and semantic systems are fully interactive.