The development of strong foundational literacy and numeracy skills for all students is a very high priority for schools, education systems and governments. The ways in which children develop these skills during the crucial years of primary education are of major interest to all concerned with students' learning and development. The ACER Longitudinal Literacy and Numeracy Study (LLANS), which commenced in 1999, undertook an investigation of the nature of literacy and numeracy development amongst Australian school children in their first seven years of schooling. This report describes the findings from the first three years of the ACER Longitudinal Literacy and Numeracy Study, spanning the period in which the students in the study entered school and continued into their second and third years at school. The key research question in this longitudinal study was: "What is the nature of literacy and numeracy development among Australian school children?" The longitudinal study involved nearly 1000 children in all Australian states and territories. The study found that there was a wide distribution of literacy achievement at school entry and this wide distribution was observed through the first three years of school. All students in the cohort made progress in literacy achievement over the first three years of school. There was also a wide distribution of numeracy achievement across the whole cohort on each assessment occasion in the first three years of school. All students in the cohort made progress in numeracy achievement over the first three years of school. Overall, girls achieved slightly better than boys in literacy in the first three years of school, while boys progressed slightly faster than girls in numeracy. The Longitudinal Literacy and Numeracy Study continued beyond the first three years of school until 2005, when the students in the sample were in Year 6. A companion volume to this report will present the findings relating to Year 3 to Year 6. (Contains 48 tables and 25 figures.) [This publication is the result of research that formed part of a program supported by a grant to the Australian Council for Educational Research by State, Territory and Commonwealth governments.]