About nine in every 20 seven-year-olds in NSW didn't meet the benchmark for phonics - a key indicator of future reading and writing proficiency.
The 2022 results, published on Friday, were slightly down on the previous year, however the assessment window was narrower.
Education Minister Sarah Mitchell said the phonics check was about helping teachers understand their students' reading progress and what support was needed.
"This check means more students will find themselves able to read well throughout their lives and is why we are already seeing improvements in results since our trial of the phonics check in 2020," she said.
"It's all part of our nation-leading education plan which includes delivering universal pre-kindergarten for every child, investing $8.6 billion for hundreds of new and upgraded schools and implementing the back-to-basics curriculum."
The average student scored 26 correct items out of a list of 40 words, compared with 26.5 in 2021.
Ms Mitchell was particularly pleased to see the proportion of Indigenous students at or above the benchmark had increased slightly from 29 per cent in 2021.
"Although we know there is more to do," she said.
"Overall the analysis of the results indicates that we are providing the right resources to support schools in the explicit teaching of phonics, particularly through the new curriculum."
