The current study examined the effects of transparency and familiarity on word recognition in adult Hebrew dyslexic readers with a phonological processing deficit as compared to typical readers. We measured oral reading response time and accuracy of single nouns in several conditions: diacritics that provide transparent but less familiar information and vowel letters that increase orthographic transparency without compromise familiarity. In line with former studies with adult dyslexics, Hebrew-speaking adults with dyslexia were significantly slower than controls. However, both dyslexic and typical readers read unpointed words faster when vowel letters were present, indicating that they may benefit from increase in orthographic transparency, when the graphemic representations are familiar. Only dyslexics read pointed words slower than unpointed words and were more sensitive to word frequency. In unpointed words, only typical readers benefitted from the reduced competition of orthographic neighbors of longer words. Results indicate that both orthographic transparency and familiarity play an important role in word recognition. Dyslexics are impaired in decoding of smaller units and are more sensitive to reduction in the familiarity of words.