In the current study we examined three questions. First: How does emergent bilingualism affect the development of metalinguistic awareness in kindergarten and first grade? We compared the changes in scores of tests of phonological awareness and morphological awareness from kindergarten to first grade, in two bilingual groups (Hebrew-Arabic and Arabic-Hebrew) and two monolingual Hebrew and Arabic speaking groups. The results revealed a bilingual advantage in kindergarten in both languages, which persisted into first grade for the native Arabic speakers in both phonology and morphology, and in phonology for the native Hebrew speakers. Importantly, all groups showed approximately equal improvement in metalinguistic abilities between kindergarten and first grade. Second: How does exposure to a typologically similar second language affect literacy acquisition in first grade? In both languages, there was a bilingual advantage in nonword reading and spelling, but no effect on reading speed. Third: What are the relationships between literacy measures in first grade and morphological, and phonological awareness in kindergarten, and how are these relationships impacted by bilingualism? These relations were slightly different for the two languages. For children learning to read Hebrew, morphological skills in kindergarten predicted both nonword reading and spelling measures in first grade. For children learning to read Arabic, only parental education predicted nonword reading and reading speed. For spelling, language experience interacted with metalinguistic abilities, with morphological abilities predicting the scores of bilinguals and phonological skills predicting the scores of monolinguals. The significance of the results for cross-language effects in literacy acquisition are discussed.