We examined the role of morphological processing in the reading of inflections and derivations in Arabic, a morphologically-rich language, among 228 first-graders and 230 second-graders. All words were morphologically complex, with differences in number of morphemes and morphological transparency. Inflections consisted of three morphemes, with high transparency of the root morpheme, while derivations consisted of two morphemes with lower transparency of the root. Results indicated that, despite their matching in frequency and syllabic length, reading performances of derivations was better than those of inflections. That is, three-morphemic highly transparent inflections were read slower and involved more errors than bi-morphemic less transparent derivations. These differences in reading performance between inflectional and derivational words might suggest that Arab-speaking novice readers use a morphological decomposition process that is reflected in reading accuracy and fluency. The results highlight the important role morphology has in reading, even at a young age, along with reading acquisition.