A study examined the progress of the second year of a 3-year literacy project in which undergraduate students enrolled in methods courses used children's literature during reading instruction of urban children, grades K-8 considered at-risk due to conditions of poverty. The entire school population participated in the project along with the undergraduates and their instructors. Specific data for kindergarten students through their first-grade year address changes in attitudes for reading and writing, knowledge of story structure, reading comprehension ability, decoding ability, and written language performance. Data analysis used both descriptive and correlational statistics as well as qualitative language descriptions. Baseline data indicated that the children were unsuccessful in including all elements of story structure in their oral retellings or in written story frames; many children were hesitant to write creatively for fear of making spelling errors; and attitudes toward recreational reading were less positive than attitudes toward academic reading. Results from the second year of the program indicated that: (1) ability to retell stories, the number of sight words recognized, and reading comprehension ability increased significantly; (2) reading attitudes, fairly positive to begin with, improved; (3) the children were more motivated to read and write; (4) they wrote more and took more risks with their writing; (5) they used writing for various purposes; (6) the content of their writing was more sincere; and (7) they used more mature sentence structures and wrote longer discourse. (A chart of data is attached.) (RS)