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Children with reading difficulties and children with a history of repeated ear infections (Otitis Media, OM) are both thought to have phonological impairments, but for quite different reasons. This paper examines the profile of phonological and morphological awareness in poor readers and children with OM. Thirty‐three poor readers were compared to individually matched chronological age and reading age controls. Their phonological awareness and morphological awareness skills were consistently at the level of reading age matched controls. Unexpectedly, a significant minority (25%) of the poor readers had some degree of undiagnosed mild or very mild hearing loss. Twenty‐nine children with a history of OM and their matched controls completed the same battery of tasks. They showed relatively small delays in their literacy and showed no impairment in morphological awareness but had phonological awareness scores below the level of reading age matched controls. Further analysis suggested that this weakness in phonological awareness was carried by a specific weakness in segmenting and blending phonemes, with relatively good performance on phoneme manipulation tasks. Results suggest that children with OM show a circumscribed deficit in phoneme segmentation and blending, while poor readers show a broader metalinguistic impairment which is more closely associated with reading difficulties.