Sleep is involved in the mechanisms underlying memory consolidation and brain plasticity. Consolidation refers to a process through which labile memories are reorganized into more stable ones. An intriguing but often neglected question concerns how pre-existing knowledge is modified when new information enters memory, and whether sleep can influence this process. We investigated how nonword learning may modify the neural representations of closely-related existing words. We also tested whether sleep contributes to any such effect by comparing a group of participants who slept during the night following a first encoding session to a sleep deprived group. Thirty participants were first intensively trained at writing nonwords on Day 1 (remote nonwords) and Day 4 (recent nonwords), following which they underwent functional MRI. This session consisted of a word lexical decision task including words orthographically-close to the trained nonwords, followed by an incidental memory task on the nonwords. Participants who slept detected real words related to remote nonwords faster than those related to recent nonwords, and showed better explicit memory for the remote nonwords. Although the full interaction comparing both groups for these effects was not significant, we found that participants from the sleep-deprivation group did not display such differences between remote and recent conditions. Imaging results revealed that the functional interplay between hippocampus and frontal regions critically mediated these behavioral effects. This study demonstrates that sleep may not only strengthen memory for recently learned items but also promotes a constant reorganization of existing networks of word representations, allowing facilitated access to orthographically-close words.