In Greek orthography, stress position is marked with a diacritic. We investigated the developmental course of processing the stress diacritic in Grades 2 to 4. Ninety children read 108 pseudowords presented without or with a diacritic either in the same or in a different position relative to the source word. Half of the pseudowords resembled the words they were derived from. Results showed that lexical sources of stress assignment were active in Grade 2 and remained stronger than the diacritic through Grade 4. The effect of the diacritic increased more rapidly and approached the lexical effect with increasing grade. In a second experiment, 90 children read 54 words and 54 pseudowords. The pattern of results for words was similar to that for nonwords suggesting that findings regarding stress assignment using nonwords may generalize to word reading. Decoding of the diacritic does not appear to be the preferred option for developing readers.