A study of 4-and 5-year-old children investigated whether measures of phonological memory and rhyme awareness reflect a common phonological processing skill or differentiable phonological abilities. Tests of phonological memory, rhyme oddity detection, reading, vocabulary and non-verbal intelligence were given to the children in each age group. Factor analyses performed on the measures showed that phonological memory and rhyme awareness measures did indeed share a common phonological processing component, but other analyses established that the two types of phonological processing task were nonetheless differentially linked with reading and vocabulary development. The two phonological memory measures taken in the study–non-word repetition and digit span–were significantly related to vocabulary knowledge in both the ages 4 and 5 groups, and to reading achievement at age 5, but not age 4. These findings replicate and extend our earlier findings. In contrast, rhyme awareness scores were not significantly associated with vocabulary knowledge at either age, but were strongly related to scores on one of the reading tests, a multiple-choice measure, at both ages 4 and 5. The pattern of findings indicates that, although there appears to be a common phonological processing component underpinning phonological memory and phonological awareness tasks, the tasks also reflect separate cognitive skills which make differential contributions to reading and vocabulary development.