So far, the study of new words and the early stages of their lexicalization and institutionalization has focused very much on the structural and semantic changes involved as well as on the gradual spread of words in a speech community. This paper focuses on insights into the concomitant processes taking place in language users' ininds. It takes up ideas on concept-formation and hypostatization put forward in the philosophy of language, word-formation and lexical semantics and relates them to recent evidence on the processing and storage of nonce-formations and recently coined complex words collected by psycholinguists and neurolinguists. The role of frequency of exposure and semantic transparency in the increasing entrenchment of concepts in language users' memories is discussed. Effects of hypostatization - the subjective impression that the existence of a word suggests the existence of a class of things denoted by the word - are shown to be very strong even in the early, phases of the establishment of new words, and pragmatic exploitations of these effects are explored.(1).