The current study examined the effect of morphological knowledge on spelling development in Hebrew‐speaking schoolchildren, adolescents and adults with dyslexia, compared with typically developing (TD) peers. Participants were 238 Hebrew‐speaking readers of five grade levels of whom 139 were TD and 99 had developmental dyslexia (DD). Participants were tested on a function letter spelling task, a phonological awareness task and a morphological awareness task. The overall picture that emerged from the results is that performance on all measures increased with grade level, with TD participants always scoring higher than peers with DD. Moreover, the higher the morphological complexity in spelling and irregularity in noun inflection, the higher the differences between the DD and TD participants. Finally, performance on the morphological awareness task contributed to spelling morphologically more complex spelling items in the TD, but not in the DD group. From clinical and educational perspectives, these results strongly suggest that rigorous morphological instruction is necessary in teaching children and adolescents with dyslexia to identify and use morphological cues in spoken and written Hebrew. Copyright © 2017 John Wiley & Sons, Ltd.