A classic finding holds that listeners have significant difficulty categorizing and discriminating unfamiliar/nonnative phonemes. In the present study we examined how this influences learning new words in a second language (L2). Adult monolingual English speakers were trained on a pseudo-French vocabulary, by matching images of cartoon “aliens” to auditory CVCV words incorporating French vowels and consonants. Of interest was comparing words incorporating vowels similar to English to those containing highly unfamiliar vowels (here, the French high front rounded vowel [y]). Accuracy, eyetracking and event-related potentials (ERPs, measured with EEG) were then used to assess word recognition post-training. The neurocognitive measures indicated weakened recognition of words containing the novel [y] vowel, compared to words with vowels that more closely resembled those in English. Furthermore, we found that a training regime that emphasized discriminating easily confused vowels (i.e., [u] vs. [y]) during learning yielded somewhat improved recognition, both immediately after training and in a follow-up session. Interestingly, learning words containing the unfamiliar [y] vowel was not accompanied by improved AX discrimination of this vowel. The results have key implications for how we understand the role of phonology in L2 word representations, and for how we approach L2 teaching.