The present study investigated the involvement of lexical knowledge in pseudoword reading by Italian children aged 8-10. In both lexical decision and reading aloud tasks, inhibitory effects were found on pseudowords derived from high-frequency words in comparison to pseudowords derived from low-frequency words. A group of adult readers showed inhibitory effects on pseudowords based on high-frequency words only in lexical decision. The inhibitory effects were interpreted as due to interference on pseudoword processing caused by lexical activation of a high-frequency base-word. The results support the view that lexical information is exploited even in the development of reading of a transparent orthography.