Two event-related potential (ERP) experiments were conducted to investigate spoken word recognition in Chinese and the effect of contextual constraints on this process. In Experiment 1, three kinds of incongruous words were formed by altering the first, second or both syllables of the congruous disyllabic terminal words in high constraint spoken sentences. Results showed an increase of N400 amplitude in all three incongruous word conditions and a delayed N400 effect in the cohort incongruous condition as compared with the rhyme incongruous and plain incongruous condition. In addition, unlike results in English, we found that the N400 effect in the rhyme incongruous condition disappeared earlier than in the plain incongruous condition. In Experiment 2, three kinds of nonwords derived from sentence congruous words were constructed by altering few or many phonetic features of the onset or the whole of the first syllable, and the resulting nonwords appeared as disyllabic terminal forms in either high or low constraint sentences. All three nonword conditions elicited the N400 component. In addition, in high constraint sentences but not in low, the amplitude and duration of the N400 varied as a function of the degree of phonetic mismatch between the terminal nonword and the expected congruous word.