To investigate the influence of sign phonology and iconicity during sign processing in deaf children, the roles of these sign features were examined using an experimental sign-picture verification paradigm. Participants had to make decisions about sign-picture pairs, manipulated according to phonological sign features (i.e., hand shape, movement, and location) and iconic sign features (i.e., transparent depiction of meaning or not). We found that phonologically related sign pairs resulted in relatively longer response latencies and more errors whereas iconic sign pairs resulted in relatively shorter response latencies and fewer errors. The results showed that competing lexical sign candidates (neighbor signs) were activated during sign processing by deaf children. In addition, deaf children exploit the iconicity of signs during sign recognition.