The role of phonological and orthographic awareness on Chinese character reading from Grade 1 to 2 was investigated with 112 Taiwanese children. Phonological awareness (onset, rime, and tone), rudimentary orthographic awareness (character configuration and structure knowledge), and character reading were assessed in each grade. The strategy of learning to read novel characters using regular or sophisticated orthography-to-phonology correspondence rules or character mapping was tested in Grade 2. Our results suggested that (a) phonological and orthographic awarenesses are important in Grade 1, and tone awareness in Grade 1 uniquely predicts character reading in Grade 2; and (b) the use of sophisticated orthography-to-phonology correspondence rules and mapping strategy are crucial for character reading in Grades 1 and 2. In addition, phonological and rudimentary orthographic awarenesses are important for using sophisticated orthographic strategy when learning to read novel characters.