The role of morphology in reading aloud was examined measuring naming latencies to pseudowords and words composed of morphemes (roots and derivational suffixes) and corresponding simple pseudowords and words. Three groups of Italian children of different ages and reading abilities, including dyslexic children, as well as one group of adult readers participated in the study. All four groups read faster and more accurately pseudowords composed of root and suffix than simple pseudowords (Experiment 1). Unlike skilled young and adult readers, both dyslexics and younger children benefited from morphological structure also in reading aloud words (Experiment 2). It is proposed that the morpheme is a unit of intermediate grain size that proves useful in processing all linguistic stimuli, including words, in individuals with limited reading ability (dyslexics and younger readers) who did not fully develop mastering of whole-word processing. For skilled readers, morphemic parsing is useful for reading those stimuli (i.e., pseudowords made up of morphemes), for which a whole-word lexical unit does not exist; where such whole-word lexical units do exist, skilled readers do not need to rely on morphological parsing because they can rely on a lexical (whole-word) reading unit that is larger than the morpheme.