Objective: We examined the white-matter microstructure of the left arcuate fasciculus, which has been associated with reading ability, in beginning readers with or without reading disability. Method: Groups were typically reading children (n = 26) or children with reading disability (n = 26), Ages 6–9, and equated on nonverbal cognitive abilities. Diffusion-weighted images were collected and TRACULA was used to extract fractional anisotropy measures from the left arcuate fasciculus. Results: White-matter microstructure was altered in children with reading disability, who exhibited significantly reduced fractional anisotropy in the left arcuate fasciculus. Among typically reading children, lower fractional anisotropy of the left arcuate fasciculus was associated with superior pseudoword reading performance. Both the group differences and variation in reading scores among the children with reading disability were associated with radial diffusivity (but not axial diffusivity), whereas variation in reading scores among typically reading children was associated with axial diffusivity (but not radial diffusivity). Conclusions: The paradoxical findings that lower fractional anisotropy was associated both with reading disability and also with better phonological awareness in typical reading development suggest that there are different maturational trajectories of white-matter microstructure in typical readers and children with reading disability, and that this difference is unique to the beginning stages of reading acquisition. The finding that reading disability was associated with radial diffusivity, but that variation in ability among typically developing readers was associated with axial diffusivity, suggests that different neural mechanisms may be associated with reading development in children with or without reading disability.