Children’s ability to reflect upon and manipulate the sounds in words (’phonological awareness’) develops as part of natural language acquisition, supports reading acquisition, and develops further as reading and spelling are learned. Children with developmental dyslexia typically have impairments in phonological awareness. Many developmental factors contribute to individual differences in phonological development. One important source of individual differences may be the child’s sensory/neural processing of the speech signal from an amplitude modulation (~ energy or intensity variation) perspective, which may affect the quality of the sensory/neural representations (’phonological representations’) that support phonological awareness. During speech encoding, brain electrical rhythms (oscillations, rhythmic variations in neural excitability) re-calibrate their temporal activity to be in time with rhythmic energy variations in the speech signal. The accuracy of this neural alignment or ’entrainment’ process is related to speech intelligibility. Recent neural studies demonstrate atypical oscillatory function at slower rates in children with developmental dyslexia. Potential relations with the development of phonological awareness by children with dyslexia are discussed.