In a previous study [Schwartz et al. (2005). Written Language and Literacy, 8, 179–207] we showed that early literacy in Russian (L1) facilitated decoding acquisition in Hebrew (L2) among Russian-Hebrew first graders. The present study examined two alternative explanations for this finding. The first account concerns the general benefits of an early start in literacy. The second relates to the specific meta-linguistic insights engendered by early exposure to a fully fledged orthography—Russian. We therefore compared two groups who had acquired literacy prior to the onset of schooling: bi-literate bilinguals (Russian L1 literates and Hebrew L2 learners) (n = 26) and early-literacy monolinguals (Hebrew-speaking monolinguals) (n = 18). The research was conducted in two stages. First, linguistic, meta-linguistic and cognitive tasks in Hebrew were administered to all children and in Russian to the bilinguals at the beginning of the first grade. Next, reading and writing skills in Hebrew were assessed at the end of the first grade. Bi-literate bilinguals showed superior levels of phonological awareness on an initial phoneme isolation task in Hebrew compared to other three groups. In addition, the bi-literate bilinguals were found to be superior to the early-literacy monolinguals on measures of word and pseudoword accuracy, which are known to depend heavily on phonological processing efficiency, but not on fluency and spelling measures, which are more reliant on stored orthographic information. This pattern of outcomes was attributed to the facilitating effects of an orthography characterized by a fully fledged alphabet, in contrast to Hebrew's primarily consonantal orthography, as well as the complex syllabic structure of Russian.