The primary aim of this study was to investigate whether and, if so, how formal teacher competence relates to the relationship between pupil reading achievement and teachers judgements' of pupils' reading achievement. The data come from the Swedish participation in the Progress in International Reading Literacy Study (PIRLS) 2001 in Grade 3. Information was obtained from pupils (N = 5271) and teachers (N = 351). Analyses were conducted using multilevel structural equation modeling (SEM) with random slopes. Teacher competence was operationalized using multiple observed indicators and defined as a latent variable. A higher correspondence between teacher judgements and pupil reading achievement for teachers with higher competence was found. The results highlight the importance of teacher competence in assessment practice.