We present a new model for lexical decision, REM-LD, that is based on REM theory (e.g., ). REM-LD uses a principled (i.e., Bayes' rule) decision process that simultaneously considers the diagnosticity of the evidence for the 'WORD' response and the 'NONWORD' response. The model calculates the odds ratio that the presented stimulus is a word or a nonword by averaging likelihood ratios for lexical entries from a small neighborhood of similar words. We report two experiments that used a signal-to-respond paradigm to obtain information about the time course of lexical processing. Experiment 1 verified the prediction of the model that the frequency of the word stimuli affects performance for nonword stimuli. Experiment 2 was done to study the effects of nonword lexicality, word frequency, and repetition priming and to demonstrate how REM-LD can account for the observed results. We discuss how REM-LD could be extended to account for effects of phonology such as the pseudohomophone effect, and how REM-LD can predict response times in the traditional 'respond-when-ready' paradigm.