Purpose: Phonological skills have been associated with developmental stuttering. The current study aimed to determine whether the neural processes underlying phonology, specifically for nonword rhyming, differentiated stuttering persistence and recovery. Method: Twenty-six children who stutter (CWS) and 18 children who do not stutter, aged 5 years, completed an auditory nonword rhyming task. Event-related brain potentials were elicited by prime, rhyming, and nonrhyming targets. CWS were followed longitudinally to determine eventual persistence (n = 14) or recovery (n = 12). This is a retrospective analysis of data acquired when all CWS presented as stuttering. Results: CWS who eventually recovered and children who do not stutter exhibited the expected rhyme effect, with larger event-related brain potential amplitudes elicited by nonrhyme targets compared to rhyme targets. In contrast, CWS who eventually persisted exhibited a reverse rhyme effect, with larger responses to rhyme than nonrhyme targets. Conclusions: These findings suggest that CWS who eventually persisted are not receiving the same benefit of phonological priming as CWS who eventually recovered for complex nonword rhyming tasks. These results indicate divergent patterns of phonological processing in young CWS who eventually persisted, especially for difficult tasks with limited semantic context, and suggest that the age of 5 years may be an important developmental period for phonology in CWS.