The purpose of this study was to compare the efficacy of two auditory processing interventions for developmental dyslexia, one based on rhythm and one based on phonetic training. Thirty-three children with dyslexia participated and were assigned to one of three groups (a) a novel rhythmic processing intervention designed to highlight auditory rhythmic information in non-speech and speech stimuli; (b) a commercially-available phoneme discrimination intervention; and (c) a no-intervention control. The intervention lasted for 6 weeks. Both interventions yielded equivalent and significant gains on measures of phonological awareness (at both rhyme and phoneme levels), with large effect sizes at the phoneme level. Both programs had medium effect sizes on literacy outcome measures, although gains were non-significant when compared to the controls. The data suggest that rhythmic training has an important role to play in developing the phonological skills that are critical for efficient literacy acquisition. It is suggested that combining both prosodic/rhythmic and phonemic cues in auditory training programs may offer advantages for children with developmental dyslexia. This may be especially true for those who appear resistant to conventional phonics training methods.