Three studies examined the presence of phonemic awareness among Austrian children before reading instruction and its relationship to concurrent and later reading. These children were about 6-7 years of age but in the majority of cases unable to read when they entered school. Testing phonemic awareness with a newly developed, rather simple and natural vowel substitution task revealed that many children showed not a single correct response or little success. In contrast, the few readers at the beginning of grade one exhibited high phonemic awareness and after a few months of reading instruction most of the children scored at least close to perfect in the vowel substitution task. Despite this apparent effect of reading on phonemic awareness there was a specific predictive relationship between initial phonemic awareness differences and success in learning to read and to spell. In agreement with other studies it was found that phonemic awareness differences before instruction predicted the accuracy of alphabetic reading and spelling at the end of grade one independent from IQ and initial differences in letter knowledge and reading. However, closer examination of the relationship between phonemic awareness before instruction and later success in learning to read revealed a specific pattern. Children with high phonemic awareness at the beginning of grade one showed uniformly high reading and spelling achievement at the end of grade one.