This study investigates the extent to which age-related language processing difficulties are due to a decline in sensory processes or to a deterioration of cognitive factors, specifically, attentional control. Two facets of attentional control were examined: inhibition of irrelevant information and divided attention. Younger and older adults were asked to categorize the initial phoneme of spoken syllables (“Was it m or n?”), trying to ignore the lexical status of the syllables. The phonemes were manipulated to range in eight steps from m to n. Participants also did a discrimination task on syllable pairs (“Were the initial sounds the same or different?”). Categorization and discrimination were performed under either divided attention (concurrent visual-search task) or focused attention (no visual task). The results showed that even when the younger and older adults were matched on their discrimination scores: (1) the older adults had more difficulty inhibiting lexical knowledge than did younger adults, (2) divided attention weakened lexical inhibition in both younger and older adults, and (3) divided attention impaired sound discrimination more in older than younger listeners. The results confirm the independent and combined contribution of sensory decline and deficit in attentional control to language processing difficulties associated with aging. The relative weight of these variables and their mechanisms of action are discussed in the context of theories of aging and language.