Schools in England are failing to diagnose at least 80% of pupils who have dyslexia, according to a report.
It said families were paying up to £1,000 for help and pupils from poorer backgrounds were being left behind.
The British Dyslexia Association said diagnosis and support was the worst it had seen since government funding started in the 1980s.
The government said it was committed to making sure all children with dyslexia achieved well in education.
By law, publicly funded schools and local authorities must try to identify and help assess children suspected of having dyslexia.
Published by the All-Party Parliamentary Group for Dyslexia and other Specific Learning Differences, the report examined the financial and attainment cost to education of students who had not been diagnosed or properly supported.
Out of 8.7 million school children in England, the report estimated about 870,000 of them have dyslexia but fewer than 150,000 were diagnosed, according to Department for Education figures.
It said when young people were "lucky enough" to get a diagnosis, it was "far from given that they will receive specialist support at all or to an adequate level".
'School just thought he was a slow learner'
Nicola Erswell's 11-year-old son Jake was diagnosed with dyslexia when he was six after his family paid £350 for an assessment because his school would not test him until he was eight.
She said: "Up to that point it was just very difficult. He wasn't getting very much input into school, they just thought he was a slow learner.
"Once we got the formal diagnosis, everything made sense."
Ms Erswell, from Bradford, described her experience as "absolutely exhausting" and said although the school had given Jake some support, it did not have the funding to give him the level he needed.
She said as a result she had spent thousands of pounds on private tutors to work with him both inside and outside the classroom.
"Teachers aren't qualified to teach dyslexic students... so it becomes very, very expensive and almost becomes unmanageable for just a normal family," Ms Erswell said.
"I know that Jake needs that attention in order to progress and he is thriving with that input I'm giving him."
Although most schools are legally obliged to try to identify pupils with dyslexia, in reality diagnosis "is rarely an option for those who cannot afford to pay privately", the report said.
Sharon Hodgson, who chairs the dyslexia parliamentary group and whose son has the condition, said there was a clear poverty divide.
"I was able and had the means to be able to support him," the MP said.
"But there's a whole host of people who do not have access to pay out to support their child and it's so unfair and unequal that they are being left behind and don't go on to fulfil their potential."
The report, researched by the British Dyslexia Association (BDA), said funding for support was being routinely cut or removed to meet budget demands and the current education system was "loaded against" students who had the condition.
As a result, such youngsters had "significantly poorer results and far higher incidents of disruptive behaviour".
Manor Wood Primary School in Leeds has a member of staff who can diagnose dyslexia and provides specialist equipment to help pupils who are struggling.
They use special pens to help pupils read questions, alternatives to writing and ear defenders to block out background noise as well as having dyslexia ambassadors for students to talk to.
Claire Ranshaw, inclusion manager, said: "For some children it's so frustrating because they know what they need to do but it's hard to get it down on paper.
"When the provision is in place and they can see they're not inadequate it completely changes their view of learning."
The report said immediate changes by the government could help affected pupils, including letting them use laptops or tablets in all classes and exams.
Longer-term though, it has called for every school to employ a specialist teacher who is able to diagnose dyslexia, support strategies and train peers.
It said while this would require a substantial investment, it would resolve the huge cost of undiagnosed dyslexia to the UK's economy.
Helen Boden, chief executive of the BDA, said: "At the moment what we do is wait for children to fail and then intervene and by the time they have failed they are behind their peers and the curriculum.
"If you have people in situ who can support learners from a young age... then you save the long term catch up to get the children where they need to be."
The Department for Education said schools were required to identify and address pupils' special educational needs and had announced new high needs funding worth more than £7m.
But it acknowledged there were some failings, and said: "We have launched a review to improve the services available to families who need support... We know the system is not working well for every family."