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This article investigates the contribution of maternal mediation in storybook reading, socioeconomic status (SES), and home literacy environment (HLE) to children's literacy level in kindergarten and first grade in Israeli Arabic-speaking families. A total of 109 kindergarten children and their mothers participated. Children's literacy level was assessed in kindergarten. Mothers and children were videotaped at home in a book reading activity, and HLE data were gathered from the mothers. One year later, the children's literacy level was assessed in first grade. Results show that mothers often used paraphrasing in the reading activities and dealt less with the written language. Correlations were found between SES and children's literacy measures in oral and written language in kindergarten and in first grade. Significant positive relationships were found between HLE and children's literacy level in kindergarten and first grade. No relationship was found between maternal mediation and children's spoken and written language skills in either age group. Regression analysis showed that HLE was the best contributor variable to children's literacy level, followed by family SES level, with no contribution of maternal mediation. Implications of the relationships between children's literacy development, SES, HLE, and parental mediation in Arabic-speaking families for researchers and educational practitioners are discussed.