Sentence reading involves constant competition between lexical candidates. Previous research with monolinguals has shown that the neighbours of a read word are inhibited, making their retrieval as a subsequent target more difficult, but the duration of this interference may depend on reading skills. In this study, we examined neighbour priming effects in sentence reading among proficient Norwegian–English bilinguals reading in their L2. We investigated the effects of the distance between prime and target (short vs. long) and the nature of the overlap between the two words (beginning or end), and related these to differences in individual cognitive skills. Our results replicated the inhibition effects found in monolinguals, albeit slightly delayed. Interference between form-related words was affected by the L2 reading skills and, crucially, by the phonological decoding abilities of the bilingual reader. We discuss the results in light of competition models of bilingual reading as well as episodic memory accounts.