Speech perception skills have been implicated in the development of phoneme-graphene correspondence, yet the exact nature of speech perception and word reading ability remains unknown. We investigate phonological sensitivity to native (English) and nonnative (Spanish) speech syllables within an auditory oddball paradigm using event related potentials (ERPs) collected from lateral temporal electrode sites in 33 monolingual English-speaking children aged 6–8 years (N = 33). We further explore the relationship between ERPs to English word reading abilities for this group. Results revealed that language stimuli (English, Spanish), ERP condition (standard, deviant), and hemisphere (left, right) all influenced the lateral N1 component. ERPs recorded from deviant English stimuli were significantly more negative within the left hemisphere compared to all other recorded ERPs. Mean amplitude differences within the N1 in left lateral electrode sites recorded in response to English phoneme contrasts significantly predicted English word reading abilities within this sample. Results indicate that speech perception of native contrasts recorded in left temporal electrode sites for the N1 component are linked to English word reading abilities in early school-aged children.