The nature of cerebral asymmetry of the language function is still not fully understood. Two main views are that laterality is best explained (1) by left cortical specialization for the processing of spectrally rich and rapidly changing sounds, and (2) by a predisposition of one hemisphere to develop a module for phonemes. We tested both of these views by investigating magnetic brain responses to the same brief acoustic stimulus, placed in contexts where it was perceived either as a noise burst with no resemblance of speech, or as a native language sound being part of a meaningless pseudoword. In further experiments, the same acoustic element was placed in the context of words. We found reliable left hemispheric dominance only when the sound was placed in word context. These results, obtained in a passive odd-ball paradigm, suggest that neither physical properties nor phoneme status of a sound are sufficient for laterality. In order to elicit left lateralized cortical activation in normal right-handed individuals, a rapidly changing spectrally rich sound with phoneme status needs to be placed in the context of frequently encountered larger language elements, such as words. This demonstrates that language laterality is bound to the processing of sounds as units of frequently occurring meaningful items and can thus be linked to the processes of learning and memory trace formation for such items rather than to their physical or phonological properties.