Morphological awareness, or sensitivity to units of meaning, is an essential component of reading comprehension development. Current neurobiological models of reading and dyslexia have largely been built upon phonological processing models, yet reading for meaning is as essential as reading for sound. To fill this gap, the present study explores the relation between children's neural organization for morphological awareness and successful reading comprehension in typically developing and impaired readers. English-speaking children ages 6-11 (N = 97; mean age = 8.6 years, 25% reading impaired) completed standard literacy assessments as well as an auditory morphological awareness task during functional near-infrared spectroscopy (fNIRS) neuroimaging, which included root (e.g., PERSON + al) and derivational (e.g., quick + LY) morphology. Regression analyses revealed that children's morphological awareness predicted unique variance in reading comprehension above and beyond demographic factors, vocabulary knowledge, and decoding ability. Neuroimaging analyses further revealed that children with stronger reading comprehension showed greater engagement of brain regions associated with integrating sound and meaning, including left inferior frontal, middle temporal, and inferior parietal regions. This effect was especially notable for the derivational morphology condition that involved manipulating more analytically demanding and semantically abstract units (e.g., un-, -ly, -ion). Together, these findings suggest that successful reading comprehension, and its deficit in dyslexia, may be related to the ability to manipulate morpho-phonological units of word meaning and structure. These results inform theoretical perspectives on literacy and children's neural architecture for learning to read.