Speech input is often understood to trigger rapid and automatic activation of successively higher-level representations for comprehension of words. Here we show evidence from magnetoencephalography that incremental processing of speech input is limited when words are heard in isolation as compared to continuous speech. This suggests a less unified and automatic process than is often assumed. We present evidence that neural effects of phoneme-by-phoneme lexical uncertainty, quantified by cohort entropy, occur in connected speech but not isolated words. In contrast, we find robust effects of phoneme probability, quantified by phoneme surprisal, during perception of both connected speech and isolated words. This dissociation rules out models of word recognition in which phoneme surprisal and cohort entropy are common indicators of a uniform process, even though these closely related information-theoretic measures both arise from the probability distribution of wordforms consistent with the input. We propose that phoneme surprisal effects reflect automatic access of a lower level of representation of the auditory input (e.g., wordforms) while cohort entropy effects are task-sensitive, driven by a competition process or a higher-level representation that is engaged late (or not at all) during the processing of single words.