Spoken utterances contain few reliable cues to word boundaries, but listeners nonetheless experience little difficulty identifying words in continuous speech. The authors present data and simulations that suggest that this ability is best accounted for by a model of spoken-word recognition combining competition between alternative lexical candidates, and sensitivity to prosodic structure. In a word-spotting experiment, stress pattern effects emerged most clearly when there were many competing lexical candidates for part of the input. Thus, competition between simultaneously active word candidates can modulate the size of prosodic effects, which suggests that spoken-word recognition must be sensitive both to prosodic structure and to the effects of competition. A version of the Shortlist model (D. G. Norris, 1994b) incorporating the Metrical Segmentation Strategy (A. Cutler & D. Norris, 1988) accurately simulates the results using a lexicon of more than 25,000 words.