A 2-year longitudinal study investigated the causal contributions of phonological processing to early reading competency. Subjects, 161 kindergarten children, were tested with a battery of measures assessing letter knowledge, reading ability, and 5 phonological constructs: rapid naming ability, rhyming ability, phonological memory (successive processing), phonological synthesis (blending), and phonological analysis. Of the subjects, 122 were administered measures of reading ability one year later in grade 1. Results indicated (1) the most successful model showed naming and memory abilities contributing toward the acquisition of letter knowledge and the development of rhyming ability, which in turn supported synthesis, which then contributed to analysis which had the only significant effect upon reading; (2) phonological analysis was the most salient predictor of grade 1 reading; and (3) the causal path was more plausibly from analysis to reading than from reading to analysis. Findings support two conclusions: phonological analysis is the most powerful cognitive variable determining early reading competency; and phonological analysis depends in turn upon earlier developing skills, including phonological synthesis, letter knowledge, and naming, memory, and rhyming abilities. (Four figures and three tables of data are attached.) (RS)