The environment in which infants learn language is multimodal and rich with social cues. Yet, the effects of such cues, such as eye contact, on early speech perception have not been closely examined. This study assessed the role of ostensive speech, signalled through the speaker's eye gaze direction, on infants’ word segmentation abilities. A familiarisation-then-test paradigm was used while electroencephalography (EEG) was recorded. Ten-month-old Dutch-learning infants were familiarised with audio-visual stories in which a speaker recited four sentences with one repeated target word. The speaker addressed them either with direct or with averted gaze while speaking. In the test phase following each story, infants heard familiar and novel words presented via audio-only. Infants’ familiarity with the words was assessed using event-related potentials (ERPs). As predicted, infants showed a negative-going ERP familiarity effect to the isolated familiarised words relative to the novel words over the left-frontal region of interest during the test phase. While the word familiarity effect did not differ as a function of the speaker's gaze over the left-frontal region of interest, there was also a (not predicted) positive-going early ERP familiarity effect over right fronto-central and central electrodes in the direct gaze condition only. This study provides electrophysiological evidence that infants can segment words from audio-visual speech, regardless of the ostensiveness of the speaker's communication. However, the speaker's gaze direction seems to influence the processing of familiar words.