This cross-lagged study examined the classroom-level associations between the reading performance of first-grade students (N = 537) and observed literacy instruction activities in classrooms (N = 30) in the autumn and spring terms. The multilevel analyses indicated that lower average word reading skills in the classrooms (i.e., there were more students who were learning to read) in the autumn were associated with higher amount of activities supporting consolidation of reading and spelling skills in the spring. In contrast, higher average word reading skills in the classrooms in the autumn were associated with higher amount of independent meaning-focused activities in the spring. Higher extent of whole-group meaning-focused activities in the autumn was positively associated with reading comprehension at classroom level in the spring, whereas independent phonological recoding practice in the autumn was negatively associated with reading comprehension in the spring. The study provides novel understanding of the associations between students’ reading performance and literacy instruction especially showing how students’ reading skills at classroom level may inform instruction in the classroom. This information may guide teachers to adapt their instruction at classroom level but also to identify the students needing differentiation. The results also acknowledge the affordances and limitations students’ skills may set for the instruction.