This study was designed to determine the contributions of metalinguistic skill and psycholinguistic processing ability to children's ability to detect the ambiguity of sentences and the relationship among all three factors to early reading ability. A total of 20 first graders and 20 second graders were given tasks testing the following abilities: ambiguity detection, conservation, lexical processing, and reading comprehension. Although intercorrelations among all four tasks were highly significant, regression analyses indicate independent contributions of processing and metalinguistic skills to ambiguity detection, which is, in turn, the sole predictor of reading comprehension. A developmental sequence is hypothesized. The authors suggest that ambiguity detection can be used to identify children who are at risk for reading failure and that training in ambiguity detection can be used in reading-readiness training and as an intervention tool. (Contains 2 tables.)