We followed children at family risk of dyslexia and children with preschool language difficulties from age 3½, comparing them with controls (N = 234). At age 8, children were classified as having dyslexia or Developmental Language Disorder (DLD) and compared at earlier time points with controls. Children with dyslexia have specific difficulties with phonology and emergent reading skills in the preschool period, whereas children with DLD, with or without dyslexia, show a wider range of impairments including significant problems with executive and motor tasks. For children with both dyslexia and DLD, difficulties with phonology are generally more severe than those observed in children with dyslexia or DLD alone. Findings confirm that poor phonology is the major cognitive risk factor for dyslexia.