Background: The aim of this longitudinal study was to examine the relationship between character reading and spelling and to explore the role of reading-related skills in Chinese literacy. Methods: A test battery that included measures of morphological awareness (homophone awareness and compound word awareness), orthographic awareness, rapid automatised naming, character reading, spelling, and IQ was administered to 127 first grade students from two primary schools in mainland China. Results: Controlling for IQ and age, the results of hierarchical regressive analyses revealed that prior reading affected subsequent spelling, and character reading Time 1 predicted spelling Time 2, [beta] value was 0.20; character reading Time 2 predicted spelling Time 3, [beta] value was 0.40. However, prior spelling did not affect subsequent reading. In addition, compound word awareness Time 2 and orthographic awareness Time 2 were found to mediate character reading Time 1 and spelling Time 3. Conclusions: This study suggests that reading influences spelling across time points from grade 1 to grade 2, and compound word awareness and orthographic awareness play important mediator roles in the process.