Abstract Two experiments examined the effects of word familiarity on word recognition and text comprehension during silent reading. Readers' eye movements were monitored as they read sentences containing words that varied in familiarity as assessed by printed estimates of word frequency, subjective ratings of familiarity, and a multiple‐choice test of meaning knowledge. Effects of word frequency were unaffected by differences in subjective familiarity rating for high frequency words. Differential effects of familiarity rating were observed in low frequency conditions. In addition, processing time on high and low frequency words did not differ when familiarity was held constant for moderately familiar words. Readers spent more initial processing time on novel words than familiar words. Performance on a vocabulary test administered after the reading session demonstrated that readers successfully acquired and retained new word meanings. Finally, reanalysis of word processing time as a function of vocabulary test performance demonstrated a systematic relationship between online processing patterns and memory for novel word meaning.