Individuals with schizophrenia show magnocellular visual pathway abnormalities similar to those described in dyslexia, predicting that reading disturbance should be a common concomitant of schizophrenia. To date, however, reading deficits have not been well established, and, in fact, reading is often thought to be normal in schizophrenia based upon results of tests such as the WRAT, which evaluate single word reading. This study evaluated “real world” reading ability in schizophrenia, relative to functioning of the magnocellular visual pathway. Standardized psychoeducational reading tests and contrast sensitivity measures were administered to 19 patients and 10 controls. Analyses of between group differences were further refined by classification of participants into reading vs. non-reading impaired groups using a priori and derived theoretical models. Patients with schizophrenia, as a group, showed highly significant impairments in reading (p <0.04–p <0.001), with particular deficits on tests of rate, comprehension and phonological awareness. Between 21% and 63% of patients met criteria for dyslexia depending upon diagnostic model vs. 0–20% of the controls. The degree of deficit correlated significantly with independent measures of magnocellular dysfunction. Reading impairment in schizophrenia reaches the level of dyslexia and is associated with compromised magnocellular processing as hypothesized. Findings related to symptoms, functioning and recommendations for reading ability assessment are discussed.