This investigation examined the effects of otitis media with effusion (OME) and its associated fluctuating conductive hearing loss on the perception of phonological and morphophonological /s/ and /z/ in young children. We predicted that children free of OME (OME-) would perform better than children with histories of OME (OME+). We also predicted that for the OME+ group morphological perception would be harder than phonological perception, because the former category carries an additional linguistic load (i.e., plurality). Sixteen children, ages 26 to 28 months (M = 26.5, SD = 0.6) were divided into two groups, the OME- (n = 8) and OME+ (n = 8) based on OME history during the first year of life. Subjects in the OME- group were free of the disease for 4/5 visits and pure tone average (PTA) was 12.6 dB HL (SD = 4.8). Subjects in the OME+ group had the disease on 3/5 visits and PTA was 23 dB HL (SD = 2.7). Experimental stimuli were six monosyllabic novel word-pairs. Members of each word-pair differed only in the presence of final voiced or voiceless fricative, marking the targets phonologically (e.g., [g [symbol: see text]]/[g [symbol: see text] s] as in 'law', 'loss') or morphophonologically (e.g., [daep]/[daeps] as in 'map' 'maps'). Subjects were taught the unfamiliar word pairs using a fast mapping procedure. Perception was tested with the bimodal preferential looking paradigm. Children in the OME- group performed significantly better than their OME+ counterparts. Individual word-pair analyses showed that OME+ group performed more poorly than the OME- group on one phonological and on two morphological targets, all ending with [s]. For the OME+ group, targets with final [s] posed greater difficulty than those with final [z], especially on morphophonological plural-(s) targets. The results suggested that the fluctuating hearing loss associated with OME might have a negative impact on speech perception.