People falsely endorse semantic associates and morpheme rearrangements of studied words at high rates in recognition testing. The coexistence of these results is paradoxical: Models of reading that presume automatic extraction of meaning cannot account for elevated false memory for foils that are related to studied stimuli only by their visual form; models without such a process cannot account for false memory for semantic foils. Here we show how sentence and list study contexts encourage different encoding modes and consequently lead to different patterns of memory errors. Participants studied compound words, such as tailspin and floodgate, as single words or embedded in sentences. We show that sentence contexts led subjects to be better able to discriminate conjunction lures (e.g., tailgate) from old words than did list contexts. Conversely, list contexts led to superior discrimination of semantic lures (e.g., nosedive) from old words than did sentence contexts.