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Background: Exposure to violence in childhood has been associated with lower school grades. However, the association between violence exposure and performance on standardized tests (such as IQ or academic achievement) in children is unknown. It is also not known whether violence exposure itself or subsequent symptoms of trauma are primarily responsible for negative outcomes. Objective: To examine the relationship between violence exposure and trauma-related distress and standardized test performance among early school-aged urban children, controlling for important potential confounders. Design: A total of 299 urban first-grade children and their caregivers were evaluated using self-report, interview, and standardized tests. Main Outcome Measures: The child’s IQ (Wechsler Preschool and Primary Scale of Intelligence–Revised) and reading ability (Test of Early Reading Ability, second edition) were the outcomes of interest. Results: After controlling for confounders (child’s gender, caregiver’s IQ, home environment, socioeconomic status, and prenatal exposure to substance abuse) violence exposure was related to the child’s IQ (P=.01) and reading ability (P=.045). Trauma-related distress accounted for additional variance in reading ability (P=.01). Using the derived regression equation to estimate effect sizes, a child experiencing both violence exposure and trauma-related distress at or above the 90th percentile would be expected to have a 7.5-point (SD, 0.5) decrement in IQ and a 9.8point (SD, 0.66) decrement in reading achievement. Conclusion: In this study, exposure to violence and trauma-related distress in young children were associated with substantial decrements in IQ and reading achievement.