In recent years, limitations of the discrepancy definition of specific reading difficulties have led researchers to propose that dyslexia is best described as a core phonological deficit. With studies of the normal development of reading as a backdrop, this paper reviews the phonological processing deficit hypothesis of dyslexia. The extant evidence suggests that phonological difficulties in dyslexia persist throughout development from the preschool years into adulthood, despite compensation of reading deficits. Moreover, individual differences in the behavioural manifestation of dyslexia are consistent with differences in the severity of underlying phonological difficulties. Implications for the early identification of dyslexia and for interventions to prevent reading failure are discussed.