The present Event-Related Potential (ERP) study aimed to investigate group differences in the early processing stages of 36 dyslexic and 24 non-dyslexic 8-12 year old children performing a lexical decision (word/pseudoword judgment) task. Our data showed larger amplitudes of negative-going waveforms in non-dyslexic children than dyslexic children over occipital/occipitotemporal electrodes at about 220 ms after stimulus onset. This electrophysiological response has previously been identified in adult readers and labeled as the N170 component. Notably, as reflected by the topographic maps children irrespective of group processed the linguistic stimuli bilaterally and we did not observe any differences in ERP parameters in words and pseudowords within groups. Contrarily, behavioral responses indicate that words were more quickly recognized than pseudowords irrespective of group. By applying post-hoc ROI analyses based on a source estimation approach (sLORETA) we observed that non-dyslexic participants, when compared to dyslexic children, demonstrated significantly stronger current density over the left hemispheric inferior temporal lobe when processing pseudowords. We concluded that impaired reading is reflected by the decreased amplitude of the early lexical component N170. The lack of a left hemispheric processing preference in both groups and similar activation for words and pseudowords can be considered a lack of reading experience and less established reading system in children. Our results indicate that dyslexic children commit fewer specialized neuronal circuits for processing print and confirm the reasoning that acquiring reading skills requires cortical reorganization over occipitotemporal regions.