This study explored developmental differences in children's segmentation skills of VC and CV syllables (e.g., /af/ and /fa/) in relation to their early reading abilities. To this end, we followed a subgroup of Dutch speaking prereaders who participated in Geudens and Sandra (2003, Experiment 1), and replicated the segmentation task in first grade, at the outset of phonics reading instruction. Reading abilities were assessed after 6 and 9 months. First, we confirmed that VCs offer an easier context to isolate phonemes than CVs. Second, matching analyses showed that this development from VC to CV segmentation posed comparatively increasing difficulties for poor segmenters. Third, this qualitatively different development was reflected in early reading performance. Our data emphasize the importance of phonetic factors and instruction-based experiences in phonological development.