This study examines the relations among the classroom literacy environment, children's interest and engagement in literacy activities, and children's early reading skills in a sample of 167 children aged 4 and 5 years enrolled in 31 Head Start classrooms. Researchers rated the classroom literacy environment. Teachers reported on children's interest in literacy activities and observers reported on children's engagement in literacy activities during large group and free play. Researchers directly assessed children's early reading skills: phonological awareness, letter-word knowledge, and expressive vocabulary. Classroom literacy environment was indirectly associated with some early reading skills via child literacy interest and engagement. Different associations were found for literacy engagement during large group compared to literacy engagement during free play. The implications of the findings are discussed, as are directions for future research.