Purpose: This study examined relationships between the use of nonmainstream American English dialects, literacy skills, and school environment among typically developing first graders (n = 617), of whom 48% were African American and 52% were White, in order to describe and better understand the difficulties many children from linguistically diverse backgrounds experience while learning to read. Method: Using hierarchical linear modeling, the authors examined the linear and quadratic relationships between students' dialect variation (DVAR) and their vocabulary, phonological awareness, and word reading skills, taking into account school environment, specifically schoolwide socioeconomic status (SES). Results: The relationships between DVAR and literacy outcomes depended on the outcome of interest and school SES. However, children's race did not generally affect the trajectory or strength of the relationships between outcomes and dialect variation. For vocabulary and word reading, the association was nonlinear, that is, U-shaped, but this depended on school SES. For phonological awareness, a negative linear relationship was observed that did not depend on school SES. Conclusions: The results inform theories on the relationship between DVAR and literacy achievement and suggest a more complex explanation of how nonmainstream American English dialect use might influence how young children learn to read.