Visual–verbal paired associate learning (PAL) refers to the ability to establish an arbitrary association between a visual referent and an unfamiliar label. It is now established that this ability is impaired in children with dyslexia, but the source of this deficit is yet to be specified. This study assesses PAL performance in children with reading difficulties using a modified version of the PAL paradigm, comprising a comprehension and a production phase, to determine whether the PAL deficit lies in children's ability to establish and retain novel object–novel word associations or their ability to retrieve the learned novel labels for production. Results showed that while children with reading difficulties required significantly more trials to learn the object–word associations, when they were required to use these associations in a comprehension‐referent selection task, their accuracy and speed did not differ from controls. Nevertheless, children with reading difficulties were significantly less successful when they were required to produce the learned novel labels in response to the visual stimuli. Thus, these results indicate that while children with reading difficulties are successful at establishing visual–verbal associations, they have a deficit in the verbal production component of PAL tasks, which may relate to a more general underlying impairment in auditory or phonological processing. Copyright © 2016 John Wiley & Sons, Ltd.