Arithmetic word-problem solving is an important component of elementary mathematics curricula that links school mathematics to real-life problem solving. The present 3-year longitudinal study examined children's arithmetic word-problem solving through understanding its 2 component processes: number-sentence construction and computation. Chinese first graders (n = 153) were tested on their arithmetic word-problem solving, in which they wrote down the number sentences before they solved the problems. They were also given a parallel test of arithmetic computation. Various cognitive predictors and mathematical outcomes were assessed. It was found that the children's difficulty in solving arithmetic word problems lay more with writing number sentences rather than in computation. The results from path analysis showed that word reading and various numerical-magnitude processing and domain-general skills significantly predicted arithmetic computation whereas only domain-general skills significantly predicted number-sentence construction. Both number-sentence construction and computation significantly predicted future arithmetic computation and mathematics achievement even after controlling for previous arithmetic computation. Theoretical and practical implications are discussed.