The importance of the preschool period in becoming a skilled reader is highlighted by a significant body of evidence that preschool children's development in the areas of oral language, phonological awareness, and print knowledge is predictive of how well they will learn to read once they are exposed to formal reading instruction in elementary school. Although there are now a number of empirically supported instructional activities for helping children who are at risk of later reading difficulties to acquire these early literacy skills, limitations in instructional time and opportunities in most preschool settings require the use of valid assessment procedures to ensure that instructional resources are utilized efficiently. In this article, we discuss the degree to which informal, diagnostic, screening, and progress-monitoring assessments of preschool early literacy skills can inform instructional decisions by considering the strengths and weaknesses of each approach to assessment. © 2011 Wiley Periodicals, Inc.