Online comprehension of naturally spoken and perceptually degraded words was assessed in 95 children ages 12 to 31 months. The time course of word recognition was measured by monitoring eye movements as children looked at pictures while listening to familiar target words presented in unaltered, time-compressed, and low-pass-filtered forms. Success in word recognition varied with age and level of vocabulary development, and with the perceptual integrity of the word. Recognition was best overall for unaltered words, lower for time-compressed words, and significantly lower in low-pass-filtered words. Reaction times were fastest in compressed, followed by unaltered and filtered words. Results showed that children were able to recognize familiar words in challenging conditions and that productive vocabulary size was more sensitive than chronological age as a predictor of children's accuracy and speed in word recognition. (Contains 3 figures, 1 footnote and 3 tables.)