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Despite decades of cognitive, neuropsychological and neuroimaging studies, it is unclear if letters are identified before word-form encoding during reading, or if letters and their combinations are encoded simultaneously and interactively. Here using functional magnetic resonance imaging, we show that a ‘letter-form’ area (responding more to consonant strings than false fonts) can be distinguished from an immediately anterior ‘visual word-form area’ in ventral occipito-temporal cortex (responding more to words than consonant strings). Letter-selective magnetoencephalographic responses begin in the letter-form area ∼60 ms earlier than word-selective responses in the word-form area. Local field potentials confirm the latency and location of letter-selective responses. This area shows increased high-gamma power for ∼400 ms, and strong phase-locking with more anterior areas supporting lexico-semantic …