The development of neurocognitive mechanisms in single word reading was studied in children ages 8-10 years using ERPs combined with priming manipulations aimed at dissociating orthographic and phonological processes. Transposed-letter (TL) priming (barin-BRAIN vs. bosin-BRAIN) was used to assess orthographic processing, and pseudohomophone (PH) priming (brane-BRAIN vs. brant-BRAIN) was used to assess phonological processing. Children showed TL and PH priming effects on both the N250 and N400 ERP components, and the magnitude of TL priming correlated positively with reading ability, with better readers showing larger TL priming effects. Phonological priming, on the other hand, did not correlate with reading ability. The positive correlations between TL priming and reading ability in children points to a key role for flexible sublexical orthographic representations in reading development, in line with their hypothesized role in the efficient mapping of orthographic information onto semantic information in skilled readers.