A longitudinal study investigated the claim that phonological memory contributes tovocabulary acquisition in young children. In the first phase, children were given tests of receptivevocabulary, receptive grammar, nonword repetition, phonological sensitivity (or“awareness”), and performance IQ. In the second phase, children were given thenonword repetition and receptive vocabulary tests. In Session 1, both nonword repetition andphonological sensitivity accounted for variation in receptive vocabulary and grammar afterperformance IQ effects were controlled. When phonological sensitivity was also controlled,nonword repetition did not account for significant additional variation in receptive vocabulary andgrammar. When performance IQ and autoregression effects were controlled, all Session 1 verbalability measures predicted Session 2 vocabulary, but only Session 1 vocabulary predicted Session2 nonword repetition. When phonological sensitivity was also controlled, Session 1 nonwordrepetition (leniently scored) predicted Session 2 vocabulary. Overall, these findings show qualifiedsupport for the claim that the capacity component of nonword repetition contributes directly tovocabulary in young children. They suggest that the association between nonword repetition andvocabulary in young children may, to a substantial extent, reflect a latent phonological processingability that is also manifest in phonological sensitivity.