The authors examined the developmental trajectories of children's early letter knowledge in relation to measures spanning and encompassing their prior language-related and cognitive measures and environmental factors and their subsequent Grade 1 reading achievement. Letter knowledge was assessed longitudinally at ages 4.5, 5.0, 5.5, and 6.5 years; earlier language skills and environmental factors were assessed at ages 3.5 and 4.5 years; and reading achievement was assessed at the beginning and end of Grade 1. The analyses were conducted on a longitudinal data set involving children with and without familial risk for dyslexia. Emerging from the trajectory analysis of letter knowledge were 3 separate clusters: delayed (n = 63), linearly growing (n = 73), and precocious (n = 51). The members of the delayed cluster were predominantly children with familial risk for dyslexia, and the members of the precocious cluster were predominantly control group children. Phonological sensitivity, phonological memory, and rapid naming skills predicted delayed letter knowledge. Environmental predictors included level of maternal education and the amount of letter name teaching. Familial risk for dyslexia made a significant contribution to the predictive relations. Membership in the delayed cluster predicted poor reading performance at Grade 1.