This study examined the influence of letter transpositions on morphological facilitation in L1 English and L1 Chinese-L2 English speakers. Morphological priming effects were investigated by comparing morphologically complex primes that either contained transposed-letters (TL) within the stem or across the morpheme boundary, relative to a substituted-letter (SL) control. Within two masked primed lexical decision experiments, the same stem targets were preceded by morphologically related, TL-within, SL-within, TL-across, SL-across, or unrelated primes. Reaction time analyses with morphologically intact primes revealed facilitation in both L1 and L2 English. In L1, TL-within priming was significant, while the magnitude of TL-across priming varied as a function of positional specific bigram frequency and spelling proficiency. In L2, TL-priming was entirely absent. These findings support models of complex word recognition that accommodate relative flexibility in letter position encoding.