During their first year of life, infants not only acquire probabilistic knowledge about the phonetic, prosodic, and phonotactic organization of their native language, but also begin to establish first lexical-semantic representations. The present study investigated the sensitivity to phonotactic regularities and its impact on semantic processing in 1-year-olds. We applied the method of event-related brain potentials to 12-and 19-month-old children and to an adult control group. While looking at pictures of known objects, subjects listened to spoken nonsense words that were phonotactically legal (pseudowords) or had phonotactically illegal word onsets (nonwords), or to real words that were either congruous or incongruous to the picture contents. In 19-month-olds and in adults, incongruous words and pseudowords, but not non-words, elicited an N400 known to reflect mechanisms of semantic integration. For congruous words, the N400 was attenuated by semantic priming. In contrast, 12-month-olds did not show an N400 difference, neither between pseudo-and nonwords nor between incongruous and congruous words. Both 1-year-old groups and adults additionally displayed a lexical priming effect for congruous words, that is, a negativity starting around 100 msec after words onset. One-year-olds, moreover, displayed a phonotactic familiarity effect, that is, a widely distributed negativity starting around 250 msec in 19-month-olds but occurring later in 12-month-olds. The results imply that both lexical priming and phonotactic familiarity already affect the processing of acoustic stimuli in children at 12 months of age. In 19-month-olds, adult-like mechanisms of semantic integration are present in response to phonotactically legal, but not to phonotactically illegal, nonsense words, indicating that children at this age treat pseudo-words, but not nonwords, as potential word candidates.