Derivational morphology has been conspicuously neglected in the LFG literature and elsewhere. Existing proposals in HPSG treat derivational patterns that are constrained and regular but sidestep problems raised by derivations that require knowledge-based, pragmatic evaluation, and most ignore the problem of nonce derivations, which must be processed on-line, i.e., concurrently with syntax. While practical implementation remains a formidable challenge, it is possible to specify a computational architecture that accounts for some ¡®worst case¡¯ patterns of productive nonce derivation in Italian that require pragmatic evaluations. This architecture factors lexical insertion into two functions, c- and m-insertion, for inflection and derivation. A buffer between these functions and the syntax component is shown to explain lexicalization phenomena, and it is argued that it may be one of the cognitive sources of Lexical Integrity.