Previous studies have shown that children suffering from develop- mental dyslexia have a deficit in categorical perception of speech sounds. The aim of the current study was to better understand the nature of this categorical perception deficit. In this study, cat- egorical perception skills of children with dyslexia were compared with those of chronological age and reading level controls. Children identified and discriminated /do–to/ syllables along a voice onset time (VOT) continuum. Results showed that children with dyslexia discriminated among phonemically contrastive pairs less accu- rately than did chronological age and reading level controls and also showed higher sensitivity in the discrimination of allophonic contrasts. These results suggest that children with dyslexia per- ceive speech with allophonic units rather than phonemic units. The origin of allophonic perception in the course of perceptual development and its implication for reading acquisition are discussed.