School-age children with specific language impairment (SLI) exhibit slower real-time (i.e. immediate) language processing relative to same-age peers and younger, language-matched peers. Results of the few studies that have been done seem to indicate that the slower language processing of children with SLI is due to inefficient higher-order linguistic processing and not to difficulties with more basic acoustic-phonetic processing. However, this claim requires further experimental verification. It was investigated whether the real-time language processing deficit of children with SLI arises from inferior acoustic-phonetic processing, inefficient linguistic processing, or both poor sensory processing and linguistic processing. If these children's impaired online language processing is due to inferior acoustic-phonetic processing, then their reaction time (RT) for recognizing words presented in list fashion should be significantly longer relative to control children's RT. If, however, their impaired language processing relates to inefficient linguistic processing, then, relative to control children, their RT for word-list-presented words should be comparable and their sentence-embedded word-recognition RT should be significantly longer. Sixteen school-age children with SLI, 16 age-matched (CA) typically developing children, and 16 receptive-syntax matched (RS) children completed two word-recognition RT tasks. In one task, children monitored word lists for the occurrence of a target word (isolated lexical processing task). In the second task, children monitored simple sentences for a target word (sentence-embedded lexical processing task). In both tasks, children made a timed response immediately upon recognizing the target. Children with SLI and CA children showed comparable RT in the isolated lexical processing task and both were faster than RS children. In the sentence-processing task, children with SLI were slower at lexical processing than CA and RS children, with CA children demonstrating the fastest processing. The real-time language processing of children with SLI appears to be attributable to inefficient higher-order linguistic processing operations and not to inferior acoustic-phonetic processing. The slower language processing of children with SLI relative to younger, language-matched children suggests that the language mechanism of children with SLI operates more slowly than what might otherwise be predicted by their linguistic competence.