Background: Studies of language in children with mild-to-moderate hearing impairment (HI) indicate that they often have problems in phonological short-term memory (PSTM) and that they have linguistic weaknesses both in vocabulary and morphosyntax similar to children with specific language impairment (SLI). However, children with HI may be more likely than children with SLI to acquire typical language skills as they get older. It has been suggested that the more persisting problems in children with SLI are due to a combination of factors: perceptual, cognitive and/or linguistic. Aims: The main aim of this study was to explore language skills in children with HI in comparison with children with SLI, and how children with both HI and language impairment differ from those with non-impaired spoken language skills. Methods & Procedures: PSTM, output phonology, lexical ability, receptive grammar and verb morphology were assessed in a group of children with mild-to-moderate HI (n = 11) and a group of children with SLI (n = 12) aged 5 years 6 months to 9 years 0 months. Outcomes & Results: The HI group tended to score higher than the SLI group on the language measures, although few of the differences were significant. The children with HI had their most obvious weaknesses in PSTM, vocabulary, receptive grammar and inflection of novel verbs. The subgroup of children with HI (five out of 10) who also showed evidence of grammatical output problems was significantly younger than the remaining children with HI. Correlation analysis showed that the language variables were not associated with age, whereas hearing level was associated with PSTM. Conclusions: Children with HI are at risk for at least a delay in lexical ability, receptive grammar and grammatical production. The problems seen in the HI group might be explained by their low-level perceptual deficit and weak PSTM. For the SLI group the impairment is more severe. From a clinical perspective an important conclusion is that the language development in children with even mild-to-moderate HI deserves attention and support. (Contains 3 tables and 2 notes.)