ObjectiveWe explored neural components in Electroencephalography (EEG) signals during a phonological processing task to assess (a) the neural origins of Baddeley’s working-memory components contributing to phonological processing, (b) the unitary structure of phonological processing and (c) the neural differences between children with dyslexia (DYS) and controls (CAC). MethodsEEG data were collected from sixty children (half with dyslexia) while performing the initial- and final- phoneme elision task. We explored a novel machine-learning-based approach to identify the neural components in EEG elicited in response to the two conditions and capture differences between DYS and CAC. ResultsOur method identifies two sets of phoneme-related neural congruency components capturing neural activations distinguishing DYS and CAC across conditions. ConclusionsNeural congruency components capture the underlying neural mechanisms that drive the relationship between phonological deficits and dyslexia and provide insights into the phonological loop and visual-sketchpad dimensions in Baddeley’s model at the neural level. They also confirm the unitary structure of phonological awareness with EEG data. SignificanceOur findings provide novel insights into the neural origins of the phonological processing differences in children with dyslexia, the unitary structure of phonological awareness, and further verify Baddeley’s model as a theoretical framework for phonological processing and dyslexia.