We describe a multiple-route model of reading development in which coarse-grained orthographic processing plays a key role in optimizing access to semantics via whole-word orthographic representations. This forms part of the direct orthographic route that gradually replaces phonological recoding during the initial phases of reading acquisition. The model predicts distinct developmental trajectories for pseudo-homophone and transposed-letter effects - two benchmark phenomena associated with phonological recoding and coarse-grained orthographic processing, respectively. Pseudo-homophone effects should decrease over the first years of reading acquisition, whereas transposed-letter effects should initially increase. These predictions were tested in a lexical decision task with 334 children in grades 1-5, and 29 skilled adult readers. In line with the predictions, we found that the pseudo-homophone effect diminished as reading level increased, whereas the transposed-letter effect first increased and then diminished. (Contains 4 figures and 2 tables.)