The use of contextual information is an important capability to facilitate language comprehension. This can be shown by studying behavioral and neurophysiological measures of accelerated word recognition when semantically or phonemically related information is provided in advance, resulting in accompanying attenuation of the respective event-related potential, i.e. the N400 effect. Against the background of age-dependent changes in a broad variety of lexical capacities, we aimed to study whether word priming is accomplished differently in elderly compared to young persons. 19 young (29.9 ± 5.6 years) and 15 older (69.0 ± 7.2 years) healthy adults participated in a primed lexical decision task that required the classification of target stimuli (words or pseudo-words) following related or unrelated prime words. We assessed reaction time, task accuracy and N400 responses. Acceleration of word recognition by semantic and phonemic priming was significant in both groups, but resulted in overall larger priming effects in the older participants. Compared with young adults, the older participants were slower and less accurate in responding to unrelated word-pairs. The expected N400 effect was smaller in older than young adults, particularly during phonemic word and pseudo-word priming, with a rather similar N400 amplitude reduction by semantic relatedness. The observed pattern of results is consistent with preserved or even enhanced lexical context sensitivity in older compared to young adults. This, however, appears to involve compensatory cognitive strategies with higher lexical processing costs during phonological processing in particular, suggested by a reduced N400 effect in the elderly.