Little is known about how word recognition processes, such as decoding, change when reading fluency improves during the school year. Such knowledge may have practical importance by determining which aspects of reading are most malleable at a certain age and reading level. The development of word-recognition subprocesses of third- and fourth-grade Finnish students (n = 81) with variable reading fluency was explored from longitudinal (6-month) text reading eye-tracking data. Generic development of the word recognition system was assessed from longitudinal changes in first fixation, average refixation durations and the number of first-pass fixations. The development of orthographic word representations and decoding was studied by examining the longitudinal changes in word frequency and word length effects, respectively. According to the results, the gain in reading fluency was mainly associated with decreases in first fixation and refixation durations. These decreases, in turn, inhibited the reduction in the number of fixations. However, students who could overcome this inhibitory effect, that is, by reading both with shorter fixation durations and with fewer fixations, developed most in reading fluency. The results seem to indicate that reading fluency development is driven by increased efficiency in representing letter strings in working memory. Over time, this development may lead to fewer fixations made into a word and, thus, more letters processed during each fixation.