•Balance of lexical knowledge affects processing efficiency in each language.•Between age 6–9 processing efficiency improves more for unbalanced bilinguals.•Bilingual proficiency affects responses to words similar in form but not meaning.•Cross-language similarity affects the course of bilingual lexical development. Using a picture–auditory word recognition task, we examined how early child bilinguals access their languages and how the languages affect one another. Accuracy and response times in “false friends” (i.e., words with similar form but unrelated meanings) and semantically related words were compared with control conditions within and across languages and grades. Study 1 tested the performance of school-age children with balanced versus unbalanced knowledge of first-language (L1) Italian and second-language (L2) German. Study 2 compared unbalanced bilingual children with L1 Italian and L2 French or German to investigate the effect of lexical similarity in the children’s languages. Children were found to activate both languages on receiving an auditory stimulus; performance in each language was affected by proficiency in the other language, degree of between-language similarity, and length of experience with each language. The BLINCS (Bilingual Language Interactive Network for Comprehension of Speech) model was invoked as a plausible framework for conceptualizing the nature of bilingual phonolexical representation and its effect on word recognition.