Using the Comprehensive Test of Phonological Processes (Wagner, Torgesen, & Rashotte, 1999), the researchers compared strengths and weaknesses in phonological processing skills in three groups: 21 children with mild to moderate sensorineural hearing loss (MSNH group), 29 children with dyslexia, and 30 age-matched controls. The MSNH group showed phonological deficits that were restricted to phonological awareness tasks (elision/blending) and a phonological memory task (nonword repetition), yet exhibited unimpaired rapid naming ability. Children with dyslexia showed deficits in all 3 phonological constructs. Finally, both degree of hearing loss and age at which hearing loss was identified in the MSNH group were related to the children's phonological processing skills. Because of their deteriorated phonological skills, children with MSNH may be at risk of starting school with weaknesses in early literacy skills. Implications for practice aimed at improving phonological and literacy skills of these children are described. (Contains 6 tables and 2 figures.)