This paper examines the correlation between reading habits and vocabulary knowledge. It is divided into theory and research. Theoretical part is divided into three parts. First part discusses the importance of reading at an early age as a predictor of later reading habits, ways of reading in 21st century, reading habits of Croatian citizens and national strategy which attempts to encourage citizens to read more. Second part deals with types of vocabulary, the importance of vocabulary learning at an early age and vocabulary growth. The vocabulary is increased by reading what refers to third part which is about learning words with the help of the context and types of context through which new words are taught. The main goal of the research was to find out whether there is a correlation between reading habits and vocabulary knowledge among children. 37 seventh grade students were included in research and their task was to complete the reading habits survey and then a test which was built of 18 words that tested their vocabulary knowledge. Tested vocabulary was found in popular children's books and as well in books for teaching language in fifth, sixth and seventh grade. The vocabulary knowledge test was conducted with receptive and expressive knowledge of words and the points were awarded for each answer according to knowledge degree of a certain word. Results showed a great deal of disinterest for reading books and accordingly, a great lack of knowledge of the tested words. The maximum number of points in the vocabulary knowledge test was 54. It was expected that respondents would know half of the total number of words (27 points), and it turned out that the highest score was 33, which is just a little more than the expected average, while the lowest score was 2. However, the survey respondents who scored the most points on the test indicated that they love to read or at least read something in their spare time. The results of the test match the school grades. Best students accomplished best results. Most of the respondents stated that at home they were encouraged to read more books, or at least reading for the school. But, those students whose parents read, mostly love to read themselves.