The predictive relationship between early language development and reading acquisition was assessed in a longitudinal study of 248 Danish children from 3 years of age to grade 2 in school (age 8). At 3 years of age several aspects of language development were measured, i.e., vocabulary, language comprehension, speech. production/articulation and sentence production. In kindergarten, at age 6, the children were tested on syntax, phonological production and language awareness as well as verbal class inclusion and working memory. In the latter part of grade 2, the children's word decoding ability was measured. A path analysis revealed significant paths from early phonological, morphological and syntactic variables, through working memory and language awareness in kindergarten, and to word decoding in Grade 2. Language awareness in kindergarten, as assessed with a group test in the present study, contributed uniquely to the prediction of Grade 2 word decoding ability even after controlling for working memory and language abilities in kindergarten. Morphological development measured at age 3 was found to have a unique effect on word decoding in Grade 2, beyond the effect mediated via kindergarten language variables. The interrelationship between various deficits in phonological processing is discussed.