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Young children’s engagement in shared reading refers to the extent of children’s attention, involvement, and enjoyment during reading and has been treated as an indicator of reading-related motivation and may determine the benefits of shared reading. In this study, we developed a teacher-rating scale of children' reading engagement (Reading Engagement Rating Scale) and tested its validity using Head Start children (n=263). We conducted an explorative and confirmatory factor analysis and demonstrated two factors, active and passive engagement. Multilevel simultaneous modeling showed that children's active (but not passive) reading engagement concurrently predicted early literacy in letter-word identification, picture vocabulary, sound awareness, and print awareness. Reading engagement levels and their predictability of literacy did not differ by gender.