Here we explore relations between auditory perception of amplitude envelope structure, prosodic sensitivity, and phonological awareness in a sample of 56 typically-developing children and children with developmental dyslexia. We examine whether rise time sensitivity is linked to prosodic sensitivity, and whether prosodic sensitivity is linked to phonological awareness. Prosodic sensitivity was measured by two reiterant speech tasks modelled on Kitzen (2001). The children with developmental dyslexia were significantly impaired in the reiterant speech tasks and in the phonological awareness tasks (onset and rime awareness). There were significant predictive relations between basic auditory processing of amplitude envelope structure (in particular, rise time), prosodic sensitivity, phonological awareness, reading, and spelling. The auditory processing difficulties that characterise children with developmental dyslexia appear to impair their sensitivity to phrase-level prosodic cues such as metrical structure as well as to phonology, but in this study phonological and prosodic sensitivity made largely independent contributions to reading.