Phonological and morphological awareness and its correlation with reading punctuated and non-punctuated words in Arabic as a first language were examined, as well as its transfer to Hebrew as a second language. Research participants were 30 fourth grade pupils. Phonological awareness was examined by phonological decoding of actual and meaningless words. Morphological awareness was examined by morphological production and distinguishing morphological relationships. Participants read punctuated, non-punctuated, and meaningless words. Findings supported hypotheses: phonological awareness and reading words in Arabic positively correlated with phonological awareness and reading words in Hebrew and morphological awareness in both languages correlated with accuracy and speed of reading punctuated and non-punctuated words in Hebrew. Research findings have practical implications for the reading curriculum in both languages.