The authors investigated the influence of teaching letter names and sounds in isolation or in the context of storybook reading on preschool children's early literacy learning and engagement during instruction. Alphabet instruction incorporated paired-associate learning of correspondences between letter names and sounds. In decontextualized treatment activities, children practiced saying the letter names and sounds that matched single letters presented on cards and in letter books, and speeded recognition of taught letters. In contextualized treatment activities, letter names and sounds were taught and practiced during oral reading of storybooks, recognizing letters in children's printed names, and speeded recognition of taught letters in words. Subjects were 127 preschool children, including 48 dual-language learners, in five public schools with low-income eligibility thresholds. Children were randomly assigned within classrooms to small groups randomly assigned to one of the two treatments. Research assistants provided 10 weeks of instruction, 12-15 minutes per day, four days per week. Both groups made statistically significant growth from pretest to posttest on measures of alphabet learning and phoneme awareness. Children in the decontextualized treatment small groups had statistically significantly higher gains than did children in the contextualized treatment small groups on taught letter sounds and phonemic awareness measured by identification of initial sounds in spoken words. There were no treatment differences between dual-language learners and non-dual-language learners. Children's engagement during instruction was statistically significantly higher in the decontextualized treatment. Findings support explicit decontextualized alphabet instruction emphasizing the relation between verbal letter labels and letter forms that enlists paired-associate learning processes. [For the corresponding grantee submission, see ED599352.]