Our previous study demonstrated a physiologic deficit in two-tone discrimination in poor readers. 1 This was specific to the left parietal area suggesting that poor readers handled rapid tones differently. The current paper extends this finding in the same population, demonstrating that poor readers also have difficulty with phonemic discrimination. Long latency auditory evoked potentials (AEP) were formed using a phonemic discrimination task in a group of children with reading disabilities and controls. Measuring peak-to-peak amplitude of the waveforms, we found reduced N1-P2 amplitude in the Poor Reader group. Using the t-statistic significance probability map (SPM) technique, we also found a group difference, maximal over the mid-parietal area, from 584 msec to 626 msec after the stimulus onset. This difference was due to a lower amplitude on the Poor Reader group. We hypothesized that this late difference constitutes a P3 response and that the Poor Reader group generated smaller P3 waves. These auditory evoked response (AER) data support a discrimination deficit for close phonemes in the Poor Reader group as they had smaller N1-P2 absolute amplitude and developed smaller P3 waves. Based on these data we should be able to differentiate between Good and Poor readers based on long latency potentials created from phonemic stimuli.