Background Children at family risk of dyslexia have been reported to show phonological deficits as well as broader language delays in the preschool years. Method The preschool language skills of 112 children at family risk of dyslexia (FR) at ages 3½ and 4½ were compared with those of children with SLI and typically developing (TD) controls. Results Children at FR showed two different profiles: one third of the group resembled the children with SLI and scored poorly across multiple domains of language including phonology. As a group, the remaining children had difficulties on tasks tapping phonological skills at T1 and T2. At the individual level, we confirmed that some FR children had both phonological and broader oral language difficulties (compared with TD controls), some had only phonological difficulties and some appeared to be developing typically. Conclusions We have highlighted the early overlap between family risk of dyslexia and SLI. A family history of dyslexia carries an increased risk for SLI and the two disorders both show an increased incidence of phonological deficits which appear to a proximal risk factor for developing a reading impairment.