The number of 11-year-olds in England who fail reading tests is "unacceptably high" and an "immediate review" of teaching methods is needed, MPs say.
Primary schools use several methods to teach reading
According to government figures, 17% do not reach the required standard.
The Commons education select committee says methods such as "synthetic phonics" - breaking words down into sounds - need to be looked at more.
However, the committee added teaching reading was "extremely complex" and Labour said progress had been made.
Cues and context
The government's National Literacy Strategy, introduced in 1998, recommends a variety of methods to improve literacy.
These are said to increase the number of "cues" to word recognition, such as its shape on the page and its grammatical construction.
The context in which it appears, in a sentence or phrase, is also seen as important.
The proportion of England's 11-year-olds reaching the required standard at reading in national tests has increased from 67% to 83% since 1997.
These figures may reflect some "teaching to the test", the MPs' report says.
Synthetic phonics breaks words into the smallest unit of sound and combines these to make words.
For example, "street" would be broken down into five components: "s-t-r-ee-t".
A study in schools in Clackmannanshire, Scotland, has shown that this method can raise the rate of progress in reading.
By the age of 11, children who had been taught synthetic phonics when they began reading were more than three years ahead of their peers in Scotland.
'Teachers know best'
The MPs' report recommends returning to these children in later years to see whether their gains persist.
Schools minister Stephen Twigg says the government intends to listen to teachers on the issue.
"Very often it's the teacher who knows best for their own child in their classroom," he said.
"Let's ensure we've got the best advice on phonics, but let's also enable teachers to get on with the job of teaching as well."
The MPs' report urges the Department for Education and Skills to carry out a large-scale study of teaching methods in England.
This should compare the "phonics fast, first and only" approach to the youngest children with others.
All aspects of literacy - such as word recognition, reading comprehension and following a narrative - must be considered, the report says.
The committee report advocates "intensive" support for children with reading difficulties, many of whom do not experience reading English at home.
It says "inspiring an enduring enjoyment of reading" should be key to teaching young children.
But this could be "endangered both by an overly formal approach" in school.
Committee chairman Barry Sheerman said: "The ability to read is the key to educational achievement.
"Poor literacy limits opportunities not only at school, but throughout life."
Teaching reading was "an extremely complex subject", involving schools, background, outside stimuli and brain development.
"However, we do consider that teaching methods also have a significant impact on a child's chances of becoming a fluent reader," Mr Sheerman added.
A Labour Party spokesman said "significant progress" had been made on reading standards and that the national strategy had a "balanced approach to teaching".
Shadow Education Secretary Tim Collins said it was letting down an "alarming proportion" of children and promised that a Conservative government would put synthetic phonics "at the heart of our literacy strategy".
Liberal Democrat education spokesman Phil Willis said there was no "one-size-fits-all" approach to literacy and that teachers needed to be freed from a "tyranny of testing and targets".
The select committee report is called Teaching Children to Read.