The aim of this study was to understand the relationship between children's knowledge of letter-sound rules ("grapheme-phoneme knowledge") and their ability to identify separate graphemes (e.g., SH, OI) that comprise words ("grapheme parsing"). We used a single-case study approach with children with phonological dyslexia who were able to read words accurately via whole-word processes ("lexical reading"), but were not able to read using grapheme-phoneme knowledge ("non-lexical reading"). These children were able to correctly parse some graphemes without grapheme-phoneme knowledge for these graphemes. However, they were unable to correctly parse some graphemes for which they had grapheme-phoneme knowledge. This dissociation suggests that children may acquire grapheme-phoneme knowledge and phoneme parsing independently. We discuss the implications of these findings for cognitive models of word reading.