Both real words and non-words have been shown to induce phonological change in children with phonological delays; however, prior research on treatment efficacy has never directly compared real words to non-words. Thus, the first goal of this research program was to evaluate the role of word lexicality (i.e., word frequency) in effecting phonological change in children's sound systems. Eight children with phonological delays (PD) were enrolled in a phonological treatment program; four were treated using high-frequency real words and four were treated using \[low -frequency\] non-words. Overall, children treated with real words demonstrated greater generalization of their treated sound to untreated words. These findings suggest that high frequency real words may be easier to access and produce than non-words. Phonological disorders may potentially be caused by impaired speech sound perception abilities, and vice versa. Thus, a second goal of this research program was to examine children's brain responses reflecting sensory encoding (sensory event-related potentials, ERPs) and attention-independent discrimination (mismatch negativity, MMN) of syllables containing sounds they could and could not produce. Five children with PD who completed the treatment study completed individually designed ERP paradigms prior to the beginning of treatment and at the completion of their treatment. Five typically developing controls (TD) completed identical ERP paradigms with a similar amount of time between sessions and no intervention. The amplitude of the auditory sensory P2 potential was enhanced in the children with PD post- treatment as compared with pre-treatment. Moreover, in contrast to the TD children who showed a robust discriminatory brain response (the MMN), children with PD revealed no clear MMN response prior to treatment, suggesting that they had difficulty making subtle distinctions involving their treatment sound. Post- treatment, the treated syllable elicited a large positivity in waveforms of the children with PD. This treatment positivity was interpreted as a less efficient discriminatory response, generated in deeper cortical layers. Thus, these findings suggest that children with PD may have abnormal sensory processing abilities.