We investigated the initial development of reading and spelling in European Portuguese. First-graders, tested in February and June, had to read and spell words and pseudowords. In February there were regularity and graphemic complexity effects, indicating that these children relied on grapheme–phoneme conversion. The lexicality effect found in spelling, in June, suggest that by the end of first grade these children had begun to construct an orthographic lexicon. However, lexical addressing is not inconsistent with phonological mediation as regularization errors increased between the sessions. Additionally, the previously reported similarity in global performance of Portuguese and French beginning readers may conceal processing differences that are related to specific characteristics of the corresponding orthographic codes.