Adults are generally adept at recognizing familiar words in unfamiliar accents. However, studies testing young children’s abilities to cope with accent-related variation in the speech signal have generated mixed results, with some work emphasizing toddlers’ early competence and other work focusing more on their long-lasting difficulties in this domain. Here, we set out to unify these two perspectives and propose that task demands may play a crucial role in children’s recognition of accented words. To this end, Canadian-English-learning 28-month-olds’ looks to images on a screen were recorded while they were presented with a Scottish-accented speaker instructing them to find a depicted target object. To examine the effect of task demands, both local sentence context and prior accent exposure were manipulated. Overall, Canadian toddlers were found to recognize Scottish-accented words successfully, showing above-chance performance in the identification of words produced in an unfamiliar accent, even when target labels were presented in isolation. However, word recognition was considerably more robust when target words were presented in sentence context. Prior exposure to the unfamiliar Scottish accent in the laboratory did not modulate children’s performance in this task. Taken together, these findings suggest that at least some task-related factors can affect children’s recognition of accented words. Understanding unfamiliar accents, like understanding familiar accents, is thus not an isolated skill but, rather, is susceptible to contextual circumstances. Future models of spoken language processing in toddlerhood should incorporate these early effects of task demands.