This study investigated preschoolers' knowledge of Chinese characters by testing character structures on four levels: radical (character components), whole characters, characters in words and characters in sentences. A total of 107 preschool children between the ages of three and six from four nursery schools in Taiwan participated in the study. Two tasks, namely, Basic Chinese character concepts and a Radical differentiating task, were conducted. The results indicated the following: (a) children younger than four years with no reading ability expressed an awareness of character structure. (b) In general, preschoolers' character knowledge increased with age; however, there were individual variations among the same age group. (c) Regression analyses revealed that understanding character and radical forms could effectively predict concurrent character reading for children aged between three and six. Our results have some practical implications for literacy instruction to preschool Chinese children and early detection of children at risk of reading difficulties.