We examined the effects of lexical competition and word frequency on spoken word recognition and production in healthy aging. Older (n = 16) and younger adults (n = 21) heard and repeated meaningful English sentences presented in the presence of multitalker babble at two signal-to-noise ratios, +10 and -3 dB. Each sentence contained three keywords of high or low word frequency and phonological neighborhood density (ND). Both participant groups responded less accurately to high- than low-ND stimuli; response latencies (from stimulus offset to response onset) were longer for high- than low-ND sentences, whereas response durations-time from response onset to response offset-were longer for low- than high-ND stimuli. ND effects were strongest for older adults in the most difficult conditions, and ND effects in accuracy were related to inhibitory function. The results suggest that the sentence repetition task described here taps the effects of lexical competition in both perception and production and that these effects are similar across the life span, but that accuracy in the lexical discrimination process is affected by declining inhibitory function in older adults.