Two aspects of visual speech processing in speechreading (word decoding and word discrimination) were tested in a group of 24 normal hearing and a group of 20 hearing‐impaired subjects. Word decoding and word discrimination performance were independent of factors related to the impairment, both in a quantitative and a qualitative sense. Decoding skill, but not discrimination skill, was associated with sentence‐based speechreading. The results were interpreted such that, in order to represent a critical component process in sentence‐based speechreading, the visual speech perception task must entail lexically induced processing as a task‐demand. The theoretical status of the word decoding task as one operationalization of a speech decoding module was discussed (Fodor, 1983). An error analysis of performance in the word decoding/discrimination tasks suggested that the perception of heard stimuli, as well as the perception of lipped stimuli, were critically dependent on the same features; that is, the temporally initial phonetic segment of the word (cf. Marslen‐Wilson, 1987). Implications for a theory of visual speech perception were