A central issue in word recognition is how readers retrieve and select the right representation among others in the mental lexicon. Recently, it has been claimed that recognition of individual words is influenced by the degree to which the words possess unique vs. shared letters or sounds relative to other words, that is, whether the words have few or several neighbors. Research on so-called neighborhood density effects advances understanding of the organization and operation of the mental lexicon. Orthographic neighborhood effects have been claimed to be facilitative, but recent studies of visual word recognition have led to a revised understanding of the nature of the orthographic neighborhood density effect. Through a reexamination of orthographic and phonological neighborhood density effects, the specific objective of the present research is to understand how orthographic and phonological representations interact across two different writing systems, i.e., English (an alphabetic orthography) and Chinese (a morphosyllabic orthography). The phenomena were studied using a joint behavioral (lexical decision) and neural imaging approach (near infrared spectroscopy, or NIRS). Orthographic and phonological (more, specifically, homophone) neighborhood density were manipulated in three lexical decision experiments with English and three with Chinese readers. After different sources of facilitative inter-lexicon connections were controlled, orthographic and phonological neighborhood density effects were found to be inhibitory in both writing systems. Inhibitory neighborhood density effects were also confirmed in two NIRS experiments of English and Chinese. The present research provided a better control of lexical characteristics than was the case in previous research on neighborhood effects and found a clear and consistent pattern of neighborhood density effects. This research supports interactive-activation models of word recognition rather than parallel-distributed models, given the evidence for lateral inhibition indexed by inhibitory neighborhood density effects. As such, the present study furthers the understanding of the organization and operation of the mental lexicon.