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Although the role of cortical structures in skilled and impaired reading has been the topic of considerable investigation, the contribution of subcortical structures to reading performance is less well understood. Here, we assess the role of the caudate, putamen, and thalamus in adults with and without reading impairment. Thirty-three individuals (19 skilled readers and 14 reading impaired individuals) participated in two functional MRI tasks: (a) silent reading of real words and (b) silent reading of nonwords. Percent signal change was calculated for each of the three structures by evaluating the signal change relative to the baseline (i.e. no task or fixation crosses), and response time was measured for each reading condition. We found that for skilled readers, activity in the putamen predicted behavioral performance for both real words and nonwords. In contrast, we found evidence for two subgroups of impaired readers: a positive caudate activity group and a negative caudate activity group. Interestingly, brain activity differentially predicted reading performance depending on whether individuals had positive or negative caudate activity. We discuss our findings in the context of developmental reading impairments, print-to-speech networks, and language processing in general.