Prior to the introduction of mother tongue-based education in 1994, the language of instruction for most subjects in Ethiopia's primary schools was the official language (Amharic) - the mother tongue of only one third of the population. This paper uses the variation in individual's exposure to the policy change across birth cohorts and mother tongues to estimate the effects of language of instruction on reading skills and early labour market outcomes. The results indicate that the reading skills of birth cohorts that gained access to mother tongue-based primary education after 1994 improved significantly by about 11 percentage points. The provision of primary education in mother tongue halved the reading skills gap between Amharic and non-Amharic mother tongue users. The improved reading skills seem to translate into gains in the labour market in terms of the skill contents of jobs held and the type of payment individuals receive for their work. An increase in school enrolment and enhanced parental educational investment at home are identified as potential channels linking mother-tongue instruction and an improvement in reading skills.