Digraphs are graphemes that are composed of two letters like the "ou" in "soup". We hypothesized that the serial-reading strategy of dyslexic readers might interfere with the processing of digraphs. We used a letter-detection task to compare the processing of vowel digraphs in dyslexic and typical-reading children. Both groups were found to be slower in detecting a letter within a vowel digraph than in detecting a letter of a single-letter grapheme. The slower response to target letters embedded in a digraph was position independent in both groups. We also found that dyslexic children did not differ from typical-reading children in the detection of letters in words. These results indicate that typical-reading and dyslexic children process vowel digraphs as perceptual units and that dyslexic children do not show impairments in this early visual process.