The ability to extract word forms from continuous speech is a prerequisite for constructing a vocabulary and emerges in the first year of life. Electrophysiological (ERP) studies of speech segmentation by 9- to 12-month-old listeners in several languages have found a left-localized negativity linked to word onset as a marker of word detection. We report an ERP study showing significant evidence of speech segmentation in Dutch-learning 7-month-olds. In contrast to the left-localized negative effect reported with older infants, the observed overall mean effect had a positive polarity. Inspection of individual results revealed two participant sub-groups: a majority showing a positive-going response, and a minority showing the left negativity observed in older age groups. We retested participants at age three, on vocabulary comprehension and word and sentence production. On every test, children who at 7 months had shown the negativity associated with segmentation of words from speech outperformed those who had produced positive-going brain responses to the same input. The earlier that infants show the left-localized brain responses typically indicating detection of words in speech, the better their early childhood language skills.