Letter position dyslexia (LPD) is a peripheral dyslexia that causes errors of letter order within words. So far, only cases of acquired LPD have been reported. This study presents selective LPD in its developmental form, via the testing of II Hebrew-speaking individuals with developmental dyslexia. The study explores the types of errors and effects on reading in this dyslexia, using a variety of tests: reading aloud, lexical decision, same-different decision, definition and letter naming. The findings indicate that individuals with developmental LPD have a deficit in the letter position encoding function of the orthographic visual analyser, which leads to underspecification of letter position within words. Letter position errors occur mainly in adjacent middle letters, when the error creates another existing word. The participants did not show an output deficit or phonemic awareness deficit. The selectivity of the deficit, causing letter position errors but no letter identity errors and no migrations between words, supports the existence of letter position encoding function as separate from letter identification and letter-to-word binding.