This report describes the development and testing of a computerized early literacy diagnostic assessment for students in prekindergarten to grade 3 that can measure skills across a variety of preliteracy and reading domains. The STAR Early Literacy assessment was developed by a team of more than 50 people, including literacy experts, psychometricians, item developers, graphic artists, audio experts, and software engineers. More than 50,000 students in 400 schools across the United States participated in STAR Early Literacy assessment development. STAR Early Literacy is a computer-adaptive assessment and database that helps educators identify a student's command of phonemic awareness, phonics, general readiness, graphophonemic knowledge, comprehension, structural analysis, and vocabulary in approximately 10 minutes. It is designed to be a low-stakes assessment that gives teachers a tool to align instruction to the needs of each student even though students require little teacher assistance while taking the assessment. Details are provided about content specification, item development, software and user interface design features. Also reported are the prototype research study involving 1,500 children from grades prekindergarten through 2 and the item calibration study involving 32,257 students in 308 schools. Other research data are being collected with a pilot adaptive version of STAR Early Literacy. Data to date indicate that the STAR Early Literacy diagnostic assessment meets the need for an accurate, inexpensive tool to measure pre-reading skills and early literacy skills in seven domains. (SLD)