The present longitudinal study aimed to investigate the development of word decoding skills during incremental phonics instruction in Dutch as a transparent orthography. A representative sample of 973 Dutch children in the first grade (M[subscript age] = 6;1, SD = 0;5) was exposed to incremental subsets of Dutch grapheme-phoneme correspondences during 6 consecutive blocks of 3 weeks of phonics instruction. Children's accuracy and efficiency of curriculum embedded word decoding were assessed after each incremental block, followed by a standardized word decoding measurement. Precursor measures of rapid naming, short-term memory, vocabulary, phonological awareness, and letter knowledge were assessed by the end of kindergarten and subsequently related to the word decoding efficiency in the first grade. The results showed that from the very beginning, children attained ceiling levels of decoding accuracy, whereas their efficiency scores increased despite the incremental character of the consecutive decoding assessments embedded in the curriculum. Structural equation modelling demonstrated high stability of the individual differences assessed by word decoding efficiency during phonics instruction during the first 5 months of the first grade. Curriculum embedded word decoding was highly related to standardized word decoding after phonics instruction was completed. Finally, early literacy and lexical retrieval, and to a lesser extent verbal and visual short term memory, predicted the first fundamental processes of mastering word decoding skills.