This three-year follow-up study investigated the associations of narrative and reading skills in typically developing Finnish children. Twenty children performed narrative retelling and story generation tasks twice, at five and eight years of age. Reading comprehension and word recognition tests were performed at the age of eight. Narratives were analysed for relevant information, total number of word tokens, clausal density and evaluation. The results showed increased narrative abilities with age, but the development was not seen in all narrative variables. This suggests that narrative tasks might capture development somewhat differently. Both narrative tasks were connected to reading skills. However, while retelling was connected to reading comprehension only, story generation related to both reading comprehension and word recognition. This study extends prior research by showing that not only retelling but also story generation is associated with reading.