The present study aimed to explore the nature of developmental dyslexia in a language considered to have a transparent orthography, namely, Dutch. We assessed the accuracy and efficiency of decoding words and pseudowords with four lengths as well as three types of phonological ability in 2,760 typical children and 397 peers with dyslexia across Grades 3-6. For typical readers, decoding levels across the grades were found to be largely a matter of increasing speed. For the readers with dyslexia, difficulties manifested themselves for both accuracy and efficiency of decoding but more for pseudowords than for words. The readers with dyslexia were also more sensitive to word-length effects on decoding. The phonological abilities of the children with dyslexia lagged behind as well. It is concluded that in Dutch, children with dyslexia show a phonological deficit and persistent problems with assembling phonology during the phonological recoding of orthographic representations.