Spanish speakers tend to perceive an illusory [e] preceding word-initial [s]-consonant sequences, e.g., perceiving [stið] as [estið] (Cuetos, Hallé, Domínguez & Segui, 2011), but this illusion is weaker for Spanish speakers who know English, which lacks the illusion (Carlson, Goldrick, Blasingame & Fink, 2016). The present study aimed to shed light on why this occurs by assessing how a brief interval spent using English impacts performance in Spanish auditory discrimination and lexical decision. Late Spanish–English bilinguals’ pattern of responses largely matched that of monolinguals, but their response times revealed significant differences between monolinguals and bilinguals, and between bilinguals who had just completed tasks in English vs. Spanish. These results suggest that late bilinguals do not simply learn to perceive initial [s]-consonant sequences veridically, but that elements of both their phonotactic systems interact dynamically during speech perception, as listeners work to identify what it was they just heard.