The present study investigated whether children with developmental dyslexia showed specific deficits in the perception of three phonetic features (voicing, place, and manner of articulation) in optimal (silence) and degraded listening conditions (envelope-coded speech versus noise), using both standard behavioral and electrophysiological measures. Performance of children with dyslexia was compared to that of younger typically developing children who were matched in terms of reading age. Results showed no significant group differences in response accuracy except for the reception of place-of-articulation in noise. However, dyslexic children responded more slowly than typically developing children across all conditions with larger deficits in noise than in envelope than in silence. At the neural level, dyslexic children exhibited reduced N1 components in silence and the reduction of N1 amplitude was more pronounced for voicing than for the other phonetic features. In the envelope condition, the N1 was localized over the right hemisphere and it was larger for typically developing readers than for dyslexic children. Finally, in stationary noise, the N1 to place of articulation was clearly delayed in children with dyslexia, which suggests a temporal de-organization in the most adverse listening conditions. The results clearly show abnormal neural processing to speech sounds in all conditions. They are discussed in the context of recent theories on perceptual noise exclusion, neural noise and temporal sampling.