Three eye movement experiments were conducted to examine the role of letter identity and letter position during reading. Before fixating on a target word within each sentence, readers were provided with a parafoveal preview that differed in the amount of useful letter identity and letter position information it provided. In Experiments 1 and 2, previews fell into 1 of 5 conditions: (a) identical to the target word, (b) a transposition of 2 internal letters, (c) a substitution of 2 internal letters, (d) a transposition of the 2 final letters, or (e) a substitution of the 2 final letters. In Experiment 3, the authors used a further set of conditions to explore the importance of external letter positions. The findings extend previous work and demonstrate that transposed-letter effects exist in silent reading. These experiments also indicate that letter identity information can be extracted from the parafovea outside of absolute letter position from the first 5 letters of the word to the right of fixation. Finally, the results support the notion that exterior letters play important roles in visual word recognition.Keywords: eye tracking, reading, transposed letters, parafoveal processing How are the letter identities and letter positions within a written word encoded? Letter identity and position must both play a role or people would be unable to distinguish between anagrams such as stop, pots, tops, opts, post, and spot. Although there is general agreement that a given letter string will activate not only the appropriate word from the lexicon but also a number of perceptually similar words, the specific way in which a model specifies the coding of letter position affects which words are considered similar.Many models, for example, assume a channel-specific (or position-specific) coding scheme. In such models, letter position is coded early in lexical processing and letters are immediately tagged to their position within the string of letters. Each letter is then processed within its specific channel independent of the other letters in the letter string. Examples of such models include the multiple read-out model (Grainger & Jacobs, 1996), the dual-route cascaded model (Coltheart, Rastle, Perry, Ziegler, & Langdon, 2001), the interactive activation model (McClelland & Rumelhart, 1981), and the activation-verification model (Paap, Newsome, McDonald, & Schvaneveldt, 1982). These models predict that the nonwords jugde, junpe, and juxxe are all equally similar to the word judge, because in each case, the nonword contains three letters in their correct letter positions. However, the nonword jugde shares all of the same letters as the word judge and differs only in a transposition of two internal, adjacent letters. So intuitively it seems that this transposed letter (TL) nonword jugde is much more similar to the base word judge than is the substituted letter (SL) nonword junpe. Indeed, research supports these intuitions; a number of experiments using a variety of tasks have found that TL nonwords are more similar to their...