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The present study reports longitudinal data on how phonological awareness is affected by mother–child interaction and the child’s language development. Sixty-six Finnish children were videotaped at 12 and 24 months of age with their mother, during joint play episodes, to assess maternal sensitivity and with an experimenter to test the children’s vocabulary. Phonological awareness was assessed at 36 and 48 months of age using tasks on detection of words that begin and end with common sound patterns. The results of Structural Equation Modeling (SEM) indicated that the precursors of phonological awareness can be traced to the earliest stage in vocabulary learning. Differences in both the mothers’ interactional sensitivity and the children’s vocabulary in infancy appear to contribute to progress in language acquisition, and particularly to phonological awareness years before reading instruction starts.