The purpose of this study was to investigate word reading abilities in first and third grade Spanish-speaking children who were learning to read in Spanish; the performance of skilled and less skilled readers was compared across measures that assessed phonological recoding ability, knowledge of grapheme-phoneme correspondences, and phonemic awareness. The findings suggest that Spanish-speaking children relied on phonological recoding strategies in the process of becoming readers. First grade, less skilled readers seemed to depend on partial letter-sound knowledge. Furthermore, spelling-sound correspondences appeared to be the main source of information used by first grade, skilled readers and third grade, less skilled readers. The latter seemed to lag behind skilled readers in the use of word-specific information. The phonemic awareness tasks displayed moderate to low correlations with reading ability in the less skilled groups. It is argued that the simple phonological structure of Spanish and its shallow orthography lead to the phonological processing of letter strings during reading acquisition.