Adults and children with developmental dyslexia exhibit reduced parietotemporal activation in functional neuroimaging studies of phonological processing. These studies used age-matched and/or intelligence quotient-matched control groups whose reading ability and scanner task performance were often superior to that of the dyslexic group. It is unknown, therefore, whether differences in activation reflect simply poorer performance in the scanner, the underlying level of reading ability, or more specific neural correlates of dyslexia. To resolve this uncertainty, we conducted a functional magnetic resonance imaging study, with a rhyme judgment task, in which we compared dyslexic children with two control groups: age-matched children and reading-matched children (younger normal readers equated for reading ability or scanner-performance to the dyslexic children). Dyslexic children exhibited reduced activation relative to both age-matched and reading-matched children in the left parietotemporal cortex and five other regions, including the right parietotemporal cortex. The dyslexic children also exhibited reduced activation bilaterally in the parietotemporal cortex when compared with children equated for task performance during scanning. Nine of the 10 dyslexic children exhibited reduced left parietotemporal activation compared with their individually selected age-matched or reading-matched control children. Additionally, normal reading fifth graders showed more activation in the same bilateral parietotemporal regions than normal-reading third graders. These findings indicate that the activation differences seen in the dyslexic children cannot be accounted for by either current reading level or scanner task performance, but instead represent a distinct developmental atypicality in the neural systems that support learning to read.