In order to inform English foreign language (EFL) diagnostic assessment of literacy, this study examined the extent to which 175 first-language Hebrew-speaking EFL young learners from fifth to tenth grade exhibited differences in single-letter grapheme recognition, sub-word, and word reading, and rapid automatized naming (RAN) of letters and numbers. In addition, this cross-sectional quasi-experimental quantitative study examined correlations between the aforementioned literacy components and oral reading speed, spelling, vocabulary, syntax, and morphological awareness. There were no differences between the grades for single-letter grapheme recognition, and participants demonstrated incomplete automatic recognition for this task. Sub-word recognition improved across grades. However, the results highlighted a lack of mastery. Sub-word recognition correlated with word reading and spelling throughout. RAN speeded measures and oral reading speed correlated with sub-word, word recognition, and spelling in the older grades illustrating the presence of accuracy and speed components. Correlations across grades between literacy components and vocabulary, syntax, and morphological awareness provided support for theories explaining how knowledge of multiple layers of words contributes to literacy acquisition. These results comprising EFL diagnostic assessment can inform reading and spelling teaching and learning.