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Abstract Developmental dyslexia is a specific learning disorder with impairments in reading and spelling acquisition. Apart from literacy problems, dyslexics show inefficient speech encoding and deficient novel word learning, with underlying problems in phonological processing and learning. These problems have been suggested to be related to deficient specialization of the left hemisphere for language processing. To examine this possibility, we tracked with magnetoencephalography (MEG) the activation of the bilateral temporal cortices during formation of neural memory traces for new spoken word forms in 7–8-year-old children with high familial dyslexia risk and in controls. The at-risk children improved equally to their peers in overt repetition of recurring new word forms, but were poorer in explicit recognition of the recurring word forms. Both groups showed reduced activation for the recurring word forms 400–1200 ms after word onset in the right auditory cortex, replicating the results of our previous study on typically developing children (Nora et al., 2017, Children show right-lateralized effects of spoken word-form learning. PLoS ONE 12(2): e0171034). However, only the control group consistently showed a similar reduction of activation for recurring word forms in the left temporal areas. The results highlight the importance of left-hemispheric phonological processing for efficient phonological representations and its disruption in dyslexia.