In this study, we consider how native status and signal degradation influence French listeners’ segmentation of an incoming speech stream containing liaison, a phonological process that misaligns word and syllable boundaries. In particular, we investigate how both first language (L1) and second language (L2) French listeners compensate for the syllable-word misalignment associated with liaison while segmenting French speech, and whether compensation-for-liaison strategies differ with decreasing signal-to-noise ratios. We consider the degree to which listeners rely on lexical knowledge, acoustic-phonetic cues, and distributional information to accomplish this compensation. Listeners completed a word identification task in which they heard adjective-noun sequences with or without liaison and were presented with the word or nonword alternatives for each noun that would result depending on whether the listener did or did not compensate for liaison. Results showed that both L1-French and L2-French listeners generally preferred lexically acceptable parses over those that resulted in a stranded nonword, and both groups gave significantly fewer lexically acceptable parses under harder listening conditions. However, the L2-French listeners demonstrated a pattern of boundary placement that indicated over-compensation for liaison, suggesting that they had successfully acquired, but not fully constrained, rules about liaison.