We explore the relationships between basic auditory processing, phonological awareness, vocabulary, and word reading in a sample of 95 children, 55 typically developing children, and 40 children with low IQ. All children received nonspeech auditory processing tasks, phonological processing and literacy measures, and a receptive vocabulary task. Compared to age-matched controls, the children with low IQ and low reading skills were significantly impaired in auditory and phonological processing, whereas the children with low IQ and preserved reading skills were not. There were also significant predictive relations between auditory processing and single word reading. Poor auditory processing was not dependent on low IQ, as auditory processing was age appropriate in the low-IQ children who were good readers. (Contains 7 figures and 5 tables.)