Purpose: This study assessed whether a categorical speech perception (CP) deficit is associated with dyslexia or familial risk for dyslexia, by exploring a possible cascading relation from speech perception to phonology to reading and by identifying whether speech perception distinguishes familial risk (FR) children with dyslexia (FRD) from those without dyslexia (FRND). Method: Data were collected from 9-year-old FRD (n = 37) and FRND (n = 41) children and age-matched controls (n = 49) on CP identification and discrimination and on the phonological processing measures rapid automatized naming, phoneme awareness, and nonword repetition. Results: The FRD group performed more poorly on CP than the FRND and control groups. Findings on phonological processing align with the literature in that (a) phonological processing related to reading and (b) the FRD group showed the lowest phonological processing outcomes. Furthermore, CP correlated weakly with reading, but this relationship was fully mediated by rapid automatized naming. Conclusion: Although CP phonological skills are related to dyslexia, there was no strong evidence for a cascade from CP to phonology to reading. Deficits in CP at the behavioral level are not directly associated with dyslexia.