Many older listeners report difficulties in understanding speech in noisy situations. Working memory and other cognitive skills may modulate, however, older listeners’ ability to use context information to alleviate the effects of noise on spoken-word recognition. In the present study, we investigated whether working memory predicts older adults’ ability to immediately use context information in the recognition of words embedded in sentences, presented in different listening conditions. In a phoneme-monitoring task, older adults were asked to detect as fast and as accurately as possible target phonemes in sentences spoken by a target speaker. Target speech was presented without noise, with fluctuating speech-shaped noise, or with competing speech from a single distractor speaker. The gradient measure of contextual probability (derived from a separate offline rating study) mainly affected the speed of recognition, with only a marginal effect on detection accuracy. Contextual facilitation was modulated by older listeners’ working memory and age across listening conditions. Working memory and age, as well as hearing loss, were also the most consistent predictors of overall listening performance. Older listeners’ immediate benefit from context in spoken-word recognition thus relates to their ability to keep and update a semantic representation of the sentence content in working memory.