One of the core principles of how the mind works is the graded, parallel activation of multiple related or similar representations. Parallel activation of multiple representations has been particularly important in the development of theories and models of language processing, where coactivated representations ("neighbors") have been shown to exhibit both facilitative and inhibitory effects on word recognition and production. Researchers generally ascribe these effects to interactive activation and competition, but there is no unified explanation for why the effects are facilitative in some cases and inhibitory in others. We present a series of simulations of a simple domain-general interactive activation and competition model that is broadly consistent with more specialized domain-specific models of lexical processing. The results showed that interactive activation and competition can indeed account for the complex pattern of reversals. Critically, the simulations revealed a core computational principle that determines whether neighbor effects are facilitative or inhibitory: Strongly active neighbors exert a net inhibitory effect, and weakly active neighbors exert a net facilitative effect. (Contains 3 footnotes, 2 tables, and 5 figures.)