American English liquids have been considered intermediate between stop consonants and vowels acoustically, articulatorily, phonologically, and perceptually. Liquids are unique among English phonemes in requiring different notation in phonetic transcription depending on syllable position. Cutting [Percep. Psychophys.16, 601–612 (1974)] found position‐dependent ear advantages for liquids in a dichotic listening task. The present study used a categorical perception paradigm to provide answers to three questions: (1) Does perception differ for liquids in syllable‐initial and syllable‐final position? (2) Are liquids perceived categorically in the context of the vowel /i/? (3) Does perception of the isolated third formant (F3), the only acoustic difference among the tokens, predict perception of the speech tokens? Fifteen subjects listened to two synthetic series‐/li/ to /ri/ and /il/ to /ir/‐in which stepwise variations of F3 parameters cued the difference in consonant identity. Results indicated that: (1) perception did not differ between syllable positions, (2) all liquids were perceived categorically, and (3) discrimination of the isolated F3 did not account for the perception of the speech sounds. [Work supported by NIMH, NICHD.]