Purpose: The authors examined speech perception deficits associated with individual differences in language ability, contrasting auditory, phonological, or lexical accounts by asking whether lexical competition is differentially sensitive to fine-grained acoustic variation. Method: Adolescents with a range of language abilities (N = 74, including 35 impaired) participated in an experiment based on McMurray, Tanenhaus, and Aslin (2002) . Participants heard tokens from six 9-step voice onset time (VOT) continua spanning 2 words ("beach/peach", "beak/peak", etc.) while viewing a screen containing pictures of those words and 2 unrelated objects. Participants selected the referent while eye movements to each picture were monitored as a measure of lexical activation. Fixations were examined as a function of both VOT and language ability. Results: Eye movements were sensitive to within-category VOT differences: As VOT approached the boundary, listeners made more fixations to the competing word. This did not interact with language ability, suggesting that language impairment is not associated with differential auditory sensitivity or phonetic categorization. Listeners with poorer language skills showed heightened competitors fixations overall, suggesting a deficit in lexical processes. Conclusion: Language impairment may be better characterized by a deficit in lexical competition (inability to suppress competing words), rather than differences in phonological categorization or auditory abilities.