In this study, event related potentials (ERPs) were used to investigate the extent to which dyslexics (aged 9-13 years) differ from normally reading controls in early ERPs, which reflect prelexical orthographic processing, and in late ERPs, which reflect implicit phonological processing. The participants performed an implicit reading task, which was manipulated in terms of letter-specific processing, orthographic familiarity, and phonological structure. Comparing consonant- and symbol sequences, the results showed significant differences in the P1 and N1 waveforms in the control but not in the dyslexic group. The reduced P1 and N1 effects in pre-adolescent children with dyslexia suggest a lack of visual specialization for letter-processing. The P1 and N1 components were not sensitive to the familiar vs. less familiar orthographic sequence contrast. The amplitude of the later N320 component was larger for phonologically legal (pseudowords) compared to illegal (consonant sequences) items in both controls and dyslexics. However, the topographic differences showed that the controls were more left-lateralized than the dyslexics. We suggest that the development of the mechanisms that support literacy skills in dyslexics is both delayed and follows a non-normal developmental path. This contributes to the hemispheric differences observed and might reflect a compensatory mechanism in dyslexics. (Contains 7 figures.)