The speech signal is rife with variations in phonetic ambiguity. For instance, when talkers speak in a conversational register, they demonstrate less articulatory precision, leading to greater potential for confusability at the phonetic level compared with a clear speech register. Current psycholinguistic models assume that ambiguous speech sounds activate more than one phonological category and that competition at prelexical levels cascades to lexical levels of processing. Imaging studies have shown that the left inferior frontal gyrus (LIFG) is modulated by phonetic competition between simultaneously activated categories, with increases in activation for more ambiguous tokens. Yet, these studies have often used artificially manipulated speech and/or metalinguistic tasks, which arguably may recruit neural regions that are not critical for natural speech recognition. Indeed, a prominent model of speech processing, the dual-stream model, posits that the LIFG is not involved in prelexical processing in receptive language processing. In the current study, we exploited natural variation in phonetic competition in the speech signal to investigate the neural systems sensitive to phonetic competition as listeners engage in a receptive language task. Participants heard nonsense sentences spoken in either a clear or conversational register as neural activity was monitored using fMRI. Conversational sentences contained greater phonetic competition, as estimated by measures of vowel confusability, and these sentences also elicited greater activation in a region in the LIFG. Sentence-level phonetic competition metrics uniquely correlated with LIFG activity as well. This finding is consistent with the hypothesis that the LIFG responds to competition at multiple levels of language processing and that recruitment of this region does not require an explicit phonological judgment.