Finnish ABC books present words with hyphens inserted at syllable boundaries. Syllabification by hyphens is abandoned in the 2nd grade for bisyllabic words, but continues for words with three or more syllables. The current eye movement study investigated how and to what extent syllable hyphens in bisyllabic ("kah-vi" "cof-fee") and multisyllabic words ("haa-ruk-ka" "fork", "ap-pel-sii-ni" "orange") affect eye movement behavior and reading speed of Finnish 1st and 2nd graders. Experiment 1 showed that 2nd graders had longer gaze durations, needed more fixations and had longer selective regression path durations for hyphenated than concatenated words. This implies that hyphenated words were difficult to process when first encountered, but also hard to integrate with prior sentence context. The effects were modified by number of syllables and reading skill. That is, the hyphenation effects were larger for multisyllabic than bisyllabic words and larger for more than less proficient readers. Experiment 2 showed the same hyphenation effect for 1st graders reading long multisyllabic words, even with a hyphen that was smaller in size and hence visually less salient. We argue that syllable hyphens prevent reasonably proficient readers from using the most efficient processing route for bi- and multisyllabic words and discuss the possible implications of the results for early Finnish reading instruction.