Purpose: Word learning requires the creation of phonological and semantic representations and links in long-term memory. Phonological distance of a given word from the spoken language affects children's lexical-phonological representations and processing. The study investigates the role of the phonological distance of Modern Standard Arabic (StA) words from the child's Spoken Arabic (SpA) vernacular in word learning in Arabic diglossia. It also examines whether, given their vulnerable phonological skills, children with developmental language disorder (DLD) show a stronger impact of phonological distance on word learning than children with typical language development (TLD). Method: One hundred children with TLD and DLD in kindergarten and in first grade (25 per group) were tested on comprehension and production word-learning probes manipulating phonological distance. Learning monosyllabic and disyllabic nonwords encoding only SpA phonemes was compared with the learning of parallel nonwords encoding one unique StA consonant each. Results: Repeated-measures analyses of variance showed higher word learning scores in children with TLD on both probes and for both syllable lengths. Moreover, all children fared significantly lower, in both comprehension and production probes, when the target stimulus was phonologically distant from the spoken language. Finally, an interaction effect was observed on the production probes, revealing differences in the developmental dynamics of phonological distance effects between the groups: Phonological distance hindered word learning among children with TLD in kindergarten, but among children with DLD in the first grade. Conclusions: The results support the role of phonological distance as a phonological complexity factor in word learning in Arabic diglossia. Furthermore, they show that the effect of phonological distance is complex and it interacts with modality, language aptitude, and grade level. The theoretical and clinical implications are discussed.