Linguistic stimuli that are degraded in various ways have been used in neuroimaging studies to uncover distinct roles in language processing for different brain regions. To identify regions differentially involved in grammatical and lexical processing, we spectrally rotated specific morphemes and manipulated morpheme order to create speech stimuli that were degraded either grammatically or lexically, yet were matched in intelligibility. Twelve participants were scanned with functional magnetic resonance imaging (fMRI) as they listened to the grammatically and lexically degraded stimuli, interspersed with clear stimuli in the context of a familiar narrative. Contrary to our expectations, we did not find any brain regions that were selectively sensitive to grammatical or lexical degradation. However, there was less signal reduction than anticipated in response to degradation of either type. These findings may reflect increased attention to the degraded stimuli due to the narrative context, attenuating the signal decreases typically associated with reduced intelligibility.