Objective The primary objective of this study was to assess central auditory functions in a group of primary school children with dyslexia mainly phonological awareness problems and to compare their performance with children with good phonological awareness ability. Design A group of 52 students with phonological awareness problems (according to their performance in phonological awareness subtest of Arabic Reading Test (ART)) and 31 age- and sex matched students without phonological awareness problems participated in the study. All children were free from any neurological problems, had normal distant visual acuity, normal peripheral hearing sensitivity in both ears and IQ equal or above 90. The children from both groups were subjected to central auditory tests (CAT). Comparison between both groups in their performance in CAT was done and the correlations between CAT and items of phonological awareness subtest were examined. Results The students with phonological awareness problems as a group performed significantly poorer than controls on all central auditory tests. Also, there was a significant correlation between the speech perception in noise test (SPIN) and phonological awareness in the left ear mainly for (Recognition of the middle sound of the word, Deletion of the middle sound of the word and Addition of a sound to the word). Conclusions The group of children with phonological awareness problem showed clinically significant diminished performance compared to the group without phonological awareness problem, reflecting difficulties in the processing of auditory information.