Little is known about the impact of learning to read on early neural development for word processing and its collateral effects on neural development in non-word domains. Here, we examined the effect of early exposure to reading on neural responses to both word and face processing in preschool children with the use of the Event Related Potential (ERP) methodology. We specifically linked children’s reading experience (indexed by their sight vocabulary) to two major neural markers: the amplitude differences between the left and right N170 on the bilateral posterior scalp sites and the hemispheric spectrum power differences in the γ band on the same scalp sites. The results showed that the left-lateralization of both the word N170 and the spectrum power in the γ band were significantly positively related to vocabulary. In contrast, vocabulary and the word left-lateralization both had a strong negative direct effect on the face right-lateralization. Also, vocabulary negatively correlated with the right-lateralized face spectrum power in the γ band even after the effects of age and the word spectrum power were partialled out. The present study provides direct evidence regarding the role of reading experience in the neural specialization of word and face processing above and beyond the effect of maturation. The present findings taken together suggest that the neural development of visual word processing competes with that of face processing before the process of neural specialization has been consolidated.