We present a new variant of a simple recunent network to model auditory word recognition in continuous speech and address the issue of lexical segmentation. Simulations ba-sed on small word sets show that the system provides a nearoptimal solution to the opposite constraints of speed, which requires that lexical processing he immediate, and reliability, which imposes that identification decisions postponed until unambiguous information is available. Contraiy to an oftenheard statement, the simulations show that the existence of embedded words is not incompatible with the notion of continuous on-line lexical processing.