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Competing predictions concerning phoneme discrimination were tested by means of event-related potentials. In research on speech perception, one tradition stems from the physiology of the auditory system whereas another emphasizes categorical perception which involves a marked psychological component. The stimuli were the end points of the Finnish /i/-/y/ continuum together with the intermediate boundary sound. Two of these stimuli were presented in each block of trials. One (the ‘standard’) had a high probability while the other (the ‘deviant’) was rare. The so-called mismatch negativity (MMN) component of the ERP in response to deviant stimuli showed a large amplitude and short latency when these two stimuli were pure vowels /i/ and /y/. When the boundary stimulus and one of the pure vowels comprised the stimulus pair, a smaller and more delayed MMN occurred. This result may be taken as support …