This article presents data and theory concerning the fundamental question of how the brain achieves a balance between integrating and separating perceptual information over time. This theory was tested in the domain of word reading by examining brain responses to briefly presented words that were either new or immediate repetitions. Critically, the prime that immediately preceded the target was presented either for 150 ms or 2,000 ms, thus examining a situation of perceptual integration versus one of perceptual separation. Electrophysiological responses during the first 200 ms following presentation of the target word were assessed using electroencephalography (EEG) and magnetoencephalography (MEG) recordings. As predicted by a dynamic neural network model with habituation, repeated words produced less of a perceptual response, and this effect diminished with increased prime duration. Using dynamics that best accounted for the behavioral transition from positive to negative priming with increasing prime duration, the model correctly predicted the time course of the event-related potential (ERP) repetition effects under the assumption that letter processing is the source of observed P100 repetition effects and word processing is the source of observed N170 repetition effects.