Background: Understanding the reading ability of children with intellectual disabilities (ID) can help them improve their communication skill and cognition, but little is known about how home literacy environment (HLE) improves the reading ability of children with ID. The aim of the current study was to explore the mutual predictive relationship between HLE and reading ability of children with ID. Methods: In June 2022 (T1) and June 2023 (T2), 157 children with mild to moderate intellectual disabilities completed the Chinese reading ability test, while their parents completed a survey on their HLE and demographic information. Descriptive statistics for all variables and Pearson correlation between HLE and reading ability (recognition, sentence reading fluency and vocabulary comprehension) at both T1 and T2 were analysed. To verify the reciprocal predictive relationships between variables, a cross-lagged analysis was conducted using latent variable structural equation modelling on HLE at T1 and T2, controlling for age and intelligence, as well as on the reading ability of children with ID at these same time points. Results: Longitudinal cross-lagged analysis showed that HLE had no significant predictive effect on future reading ability of children with ID, but reading ability had a significant positive predictive effect on future HLE. Conclusions: The current results suggest that the more the parents are aware of the reading ability of their children with ID, the more they invest in their children's reading development, thereby encouraging them to invest further in creating an enriched HLE for their children.