Background: The present study examined differences in the prediction of reading development and reading difficulties in Estonia (n = 348) and Finland (n = 344). These neighbouring countries share many similarities in terms of their language, orthography and educational system; however, they differ in the timing of the onset of reading instruction, which is kindergarten in Estonia and Grade 1 in Finland. Methods: Children's skills were assessed three times -- fall and spring in Grade 1 and spring in Grade 2. Results: The results showed that school-entry rapid automatised naming and reading fluency predicted the development of fluency in Grade 2, but reading fluency was a stronger predictor in Estonia than in Finland. In addition, school-entry reading fluency was the strongest predictor of reading comprehension in Grade 2. Furthermore, listening comprehension was a stronger predictor of reading comprehension in the Finnish sample than in the Estonian sample. Finally, high-risk children were identified based on their slow reading and rapid automatised naming at school entry. In Estonia, the reading development of high-risk children was declining compared to their peers, while the Finnish high-risk children were catching up with their peers. The high-risk children in the Finnish sample also had reading difficulties less often than the Estonian sample. Conclusions: The findings suggest that the skills at school entry are stronger predictors of reading development in Estonia than in Finland. The reasons for this could be the earlier onset of reading instruction in kindergarten in the Estonian sample or differences in reading instruction practices between Estonian and Finnish schools.