This study evaluated letter recognition processing in Italian developmental dyslexics and its potential contribution to word reading. Letter/bigram recognition (naming and matching) and reading of words and non-words were examined. A group of developmental dyslexics and a chronologically age-matched group of skilled readers were examined. Dyslexics were significantly slower than skilled readers in all tasks. The rate and amount model (RAM, Faust et al., 1999) was used to detect global and specific factors in the performance differences controlling for the presence of over-additivity effects. Two global factors emerged. One (“letter-string” factor) accounted for the performance in all (and only) word and non-word reading conditions, indicating a large impairment in dyslexics (more than 100% reaction time – RT increase as compared to skilled readers). All the letter/bigram tasks clustered on a separate factor (“letter” factor) indicating a mild impairment (ca. 20% RT increase as compared to skilled readers). After controlling for global factor influences by the use of the z-score transformation, specific effects were detected for the “letter-string” (but not the “letter”) factor. Stimulus length exerted a specific effect on dyslexics' performance, with dyslexics being more affected by longer stimuli; furthermore, dyslexics showed a stronger impairment for reading words than non-words. Individual differences in the “letter” and “letter-string” factors were uncorrelated, pointing to the independence of the impairments. The putative mechanisms underlying the two global factors and their possible relationship to developmental dyslexia are discussed.