A proximal cause of reading disabilities is a deficit in phonological processing. A consequence of this deficit is inferior performance in one or more cognitive operations that use phonological information, including phonological awareness, lexical retrieval, and verbal memory. Some assert that these phonological processing difficulties are the direct result of impaired auditory perceptual skills. This paper examines the theoretical and empirical grounds for this hypothesis. First, evidence in support of perceptual deficits as a root cause of poor reading achievement and specific language impairments is presented, followed by opposing evidence. Finally, research that has examined the efficacy of interventions based on the auditory perceptual deficit hypothesis is reviewed. (Contains 1 table.)