BACKGROUND: Formulaic expressions, including idioms and other fixed expressions, comprise a significant proportion of discourse. Although much has been written about this topic, controversy remains about their psychological status. An important claim about formulaic expressions, that they are known to native speakers, has seldom been directly demonstrated. This study tested the hypothesis that formulaic expressions are known and stored as whole unit mental representations by performing three perceptual experiments. METHOD: Listeners transcribed two kinds of spectrally-degraded spoken sentences, half formulaic, and half novel, newly created expressions, matched for grammar and length. Two familiarity ratings, usage and exposure, were obtained from listeners for each expression. Text frequency data for the stimuli and their constituent words were obtained using a spoken corpus. RESULTS: Participants transcribed formulaic more successfully than literal utterances. Usage and familiarity ratings correlated with accuracy, but formulaic utterances with low ratings were also transcribed correctly. Phrase types differed significantly in text frequency, but word frequency counts did not differentiate the two kinds of expressions. DISCUSSION: These studies provide new converging evidence that formulaic expressions are encoded and processed as whole units, supporting a dual-process model of language processing, which assumes that grammatical and formulaic expressions are differentially processed.