The present study retrospectively examined early difficulties with pho
nological coding and phonemic segmentation of German children who afte
r four years in school were diagnosed as dyslexic. German, in comparis
on to English, exhibits rather simple and straightforward grapheme-pho
neme correspondences, and the initial teaching approach was phonics or
iented. Despite these favorable circumstances for the acquisition of p
honological coding, the majority of the later dyslexic children had pa
rticular difficulties with the accurate reading of nonwords and of unf
amiliar words after about seven months of reading instruction. However
, there were enormous differences between the dyslexic children. Two o
f them were completely unable to 'blend' phonemes into pronunciations,
another seven were slow and error prone decoders, and three children
had slow and laborious pronunciation assembly as the core problem. The
majority of the later dyslexic children also exhibited phonemic segme
ntation deficits as tested with a nonword spelling task and a phoneme
reversal task. In correspondence with findings from older German dysle
xic children, the early difficulties with accurate phonological coding
and phonemic segmentation were no longer found at the end of grade fo
ur. Children then suffered from very slow reading and poor spelling. I
n general, the difficulties of German dyslexic children emphasize the
phonological impairment account of dyslexia. More specifically, these
findings suggest that the assembly of letter sounds into pronunciation
s is particularly affected in the early phase of learning to read a co
nsistent orthography.