Thirty years of research has uncovered the broad principles that characterize spoken word processing across listeners. However, there have been few systematic investigations of individual differences. Such an investigation could help refine models of word recognition by indicating which processing parameters are likely to vary, and could also have important implications for work on language impairment. The present study begins to fill this gap by relating individual differences in overall language ability to variation in online word recognition processes. Using the visual world paradigm, we evaluated online spoken word recognition in adolescents who varied in both basic language abilities and non-verbal cognitive abilities. Eye movements to target, cohort and rhyme objects were monitored during spoken word recognition, as an index of lexical activation. Adolescents with poor language skills showed fewer looks to the target and more fixations to the cohort and rhyme competitors. These results were compared to a number of variants of the TRACE model (McClelland & Elman, 1986) that were constructed to test a range of theoretical approaches to language impairment: impairments at sensory and phonological levels; vocabulary size, and generalized slowing. None of the existing approaches were strongly supported, and variation in lexical decay offered the best fit. Thus, basic word recognition processes like lexical decay may offer a new way to characterize processing differences in language impairment. (Contains 12 figures and 5 tables.)