This article examines the relationship between individual differences in speech perception and sublexical/phonological processing in reading. We used an auditory phoneme identification task in which a /ba/-/pa/ syllable continuum measured sensitivity to classify participants into three performance groups: poor, medium, and good categorizers. A lexical decision task manipulated syllable and word frequency. We found that the two tasks were associated. Poor categorizers did not present the typical syllable frequency effect; however, the other groups were sensitive to phonological information to differing degrees and showed the inhibitory syllable frequency effect only for low-frequency words. These results suggest that auditory phoneme identification efficiency may be related to the sublexical processes involved in reading words. (Contains 2 figures and 1 table.)