This study estimated reading achievement gaps in different ethnic, gender, and socioeconomic groups of 1st graders in the U.S. compared with specific reference groups and identified statistically significant correlates and moderators of early reading achievement. A subset of 2,296 students nested in 184 schools from the Early Childhood Longitudinal Study (ECLS) kindergarten to 1st-grade cohort were analyzed with hierarchical linear models. With child-level background differences controlled, significant 1st-grade reading differentials were found in African American children (-0.51 SD units below Whites), boys (-0.31 SD units below girls), and children from high-poverty households (-0.61 to-1.0 SD units below well-to-do children). In all 3 comparisons, the size of the reading gaps increased from kindergarten entry to 1st grade. Reading level at kindergarten entry was a significant child-level correlate, related to poverty status. At the school level, class size and elementary teacher certification rate were significant reading correlates in 1st grade. Cross level interactions indicated reading achievement in African American children was moderated by the schools students attended, with attendance rates and reading time at home explaining the variance.