Although children with speech impairment are at increased risk for impaired literacy, many learn to read and spell without difficulty. Around half the children with speech impairment have delayed acquisition, making errors typical of a normally developing younger child (e.g. reducing consonant clusters so that "spoon" is pronounced as "poon"). A smaller group make disordered speech errors that are atypical of normal development (e.g. marking all consonant clusters with /f/ so "bread" is pronounced as "fed"). Profiles of surface speech errors may provide a way of identifying underlying deficits that account for differences in literacy development. This paper investigates the relationship between type of speech impairment, phonological awareness and literacy acquisition. Thirteen children, aged 5;2-7;9, with either delayed or disordered speech and six typically developing controls were compared on tasks measuring onset-rime awareness, letter knowledge, phonological rule knowledge, real and non-word reading. Children with delayed speech development performed like typically developing controls on all phonological awareness and reading measures. Children with speech disorder, who consistently made errors atypical of normal development, had difficulties on all phonological awareness tasks with the exception of syllable awareness. They showed no measurable emergent reading ability. The results suggest the need to differentiate between speech delay and disorder when planning intervention, particularly for literacy skills. (Contains 1 note and 2 tables.)