We examined the associations between teachers' knowledge of language and literacy constructs, perceived ability to teach early literacy skills, instructional practice, and students' early reading outcomes. The results showed that teacher knowledge predicted quality of instruction, but neither quality of instruction nor teacher knowledge were associated with stronger decoding or word reading outcomes once earlier decoding skills were controlled. Differentiation of instruction was observed more in classrooms with lower initial decoding skills, and it contributed to better decoding at Time 2. Finally, perceived ability predicted decoding and years of experience predicted word reading at Time 2.