Reading strategy instruction is positively related to students' reading literacy. However, little is known about how reading instruction that emphasizes different types of reading strategies affects reading literacy. This study examined how Singapore primary school teachers' reading strategy instruction affected Grade Four students' reading literacy, and how reading strategy instruction was affected by teacher collaboration and other teacher characteristics. To control for possible effects of student characteristics on their reading literacy, we also included at the student level the students' gender and their socioeconomic status as represented by their parents' educational level. We used a multilevel structural equation modeling approach to analyze the Progress in International Reading Literacy Study 2016 (PIRLS 2016) data provided by 6,327 Singapore students nested within 356 teachers. At the teacher level, (1) teachers' instruction on reading strategies can be categorized into micro-level reading strategy instruction and macro-level reading strategy instruction; (2) only instruction on the macro-level of comprehension significantly affected students' reading literacy; and (3) teachers' reading strategy instruction was positively impacted by their collaboration with other teachers. At the student level, reading literacy was positively affected by the parents' educational level, the language the students used before starting school, and the students' gender (in favor of girls). The findings suggest that the relationship between reading strategy instruction and reading literacy is complex. To develop learners' reading literacy, teachers should emphasize both micro-level reading strategies and macro-level reading strategies in their reading instruction.