In the current research we investigate the role of early phonological awareness skills on reading development in diglossic Arabic. Two-hundred and six Arabic speaking first graders, composed of 25 at-linguistic risk pupils (LR group) and 181 normally developing readers, representing the found heterogeneity in the classroom participated in this study. For this purpose, phonological training program was developed where we followed the pupils' development in both phonological awareness skills and reading development in second grade. As indicated by the study results, higher achievements in phonological awareness measures was noted among HG group in first grade. After Training, significant improvement in phonological awareness was noted among both groups, where LR group was able to close the gaps in phonological awareness skills with HG group. When examining the relationship between phonological awareness and reading performance, moderate positive correlation was found within HG group whereas strong positive relationship was encountered with the LR group. Despite the progress in phonological awareness skills and its strong relationship with reading, LR group showed lower reading performance when compared to HG group. The study results are discussed in relation to its scientific and didactic implications on Arabic reading acquisition.