This paper presents a method for designing and organizing a multi‐purpose morpheme‐based lexical database for Modern Greek. The authors are in favour of multi‐purpose lexical databases, to avoid a repetition of effort from one application to another, and of morpheme‐based lexica, to achieve flexibility, reusability, expandability, and compact representation of data for future developments. The suggested method for modelling the lexical database in the word‐processing function is the Entity/Relationship model, according to the linguistic theory of Generative Lexical Morphology. In the framework of this model, which depicts rich linguistic information, we can introduce new data structures for storing the morphemes. These new data structures are matrix encoding schemes; one type, called the Cartesian Lexicon, has been designed as a part of our research. The matrix data structures combine the advantages of hash‐tables and tries, which are very popular data structures in supporting machine readable dictionaries. Our system was tested on the Modern Greek language, and demonstrated a satisfactory overall performance in word‐processing. These methods could also be applicable to other languages having morphological systems similar to Modern Greek.