Language learners have to acquire the phonological grammar of their native language, and different levels of representations on which the grammar operates. Developmental dyslexia is associated with a phonological deficit, which is commonly assumed to stem from degraded phonological representations. The present study investigates one aspect of the phonological grammar, phonological assimilation rules. Specifically, it examines whether dyslexic adults have acquired phonological rules in speech production normally, and whether they compensate for them in perception. Contrary to the "degraded phonological representations hypothesis", these adults produced phonological assimilations, and perceptually compensated for assimilations to the same extent as control participants. This suggests that individuals with dyslexia have acquired the phonological rules of their native language normally, and implies that they must have well-specified phonological representations, at least with respect to the features tested here. Nevertheless, these dyslexic adults still exhibit the typical phonological deficit as measured by phonological awareness, verbal short-term memory and rapid automatic naming tasks. Thus, it is suggested that the explanation for their phonological deficit must lie elsewhere than in their phonological representations and grammar.