There is a wealth of evidence linking letter knowledge and phoneme awareness, but there is little research examining the nature of this relationship. This article aims to elucidate this relationship by considering the links between letter knowledge and two sub-skills of phoneme awareness: phoneme segmentation and phoneme invariance. Two studies are reported. The first study consisted of an eight-month longitudinal study with 56 pre-literate children. No child within this group was successful on any phoneme awareness task unless they knew at least one letter. Letter knowledge was also a significant predictor of later phoneme completion and deletion. The hypothesis that letter knowledge is an important precursor for phoneme awareness was then investigated in a small-scale intervention study with ten children. These children were taught letters and their phoneme awareness was monitored. It was found that letter knowledge was specifically related to the development of phoneme segmentation in pre-literate children. Possible reasons for this finding are discussed.