Purpose In this study, we examine how well kindergarten letter identification and phonological awareness predict 2nd grade word reading and dyslexia in children with developmental language disorder (DLD) and their age- and grade-matched peers with typical language (TL). Method We employ (a) logistic regression to determine how letter identification and phonological awareness predict dyslexia, that is, dichotomous categorization of good or poor word reading, in children with DLD and TL and (b) quantile regression to determine how letter identification and phonological awareness are associated with word reading abilities on a continuum in these groups of children. Results Logistic regression revealed that letter identification was the only significant, unique kindergarten predictor of dyslexia in 2nd grade children with DLD, when compared to phonological awareness. In children with TL, both kindergarten letter identification and phonological awareness significantly predicted dyslexia in 2nd grade. Quantile regression revealed that kindergarten letter identification was a stronger predictor of 2nd grade word reading for average and lower achieving word readers with DLD and their peers with TL compared to higher performing readers. Phonological awareness was weakly associated with word reading across the full continuum of word reading abilities in children with DLD. Conclusion Letter identification is a more accurate predictor of poor word reading and dyslexia than phonological awareness in kindergarten children with DLD, which has important implications for recent U.S. legislation around early identification of dyslexia in all children.