BACKGROUND: More struggling readers could profit from additional help at the beginning of reading acquisition if dyslexia prediction were more successful. Currently, prediction is based only on behavioral assessment of early phonological processing deficits associated with dyslexia, but it might be improved by adding brain-based measures. METHODS: In a 5-year longitudinal study of children with (n = 21) and without (n = 23) familial risk for dyslexia, we tested whether neurophysiological measures of automatic phoneme and tone deviance processing obtained in kindergarten would improve prediction of reading over behavioral measures alone. RESULTS: Together, neurophysiological and behavioral measures obtained in kindergarten significantly predicted reading in school. Particularly the late mismatch negativity measure that indicated hemispheric lateralization of automatic phoneme processing improved prediction of reading ability over behavioral measures. It was also the only significant predictor for long-term reading success in fifth grade. Importantly, this result also held for the subgroup of children at familial risk. CONCLUSIONS: The results demonstrate that brain-based measures of processing deficits associated with dyslexia improve prediction of reading and thus may be further evaluated to complement clinical practice of dyslexia prediction, especially in targeted populations, such as children with a familial risk.