Showing capital letters and how you read from left to right and top to bottom of the page also improves the childrens' spelling and language comprehension skills.
"By showing them what a letter is and what a letter means, and what a word is and what a word means, we're helping them to crack the code of language and understand how to read," said Shayne Piasta, an assistant professor of Teaching and Learning at Ohio State University, who led the study.
Under-fives who were taught to read this way developed more advanced reading skills one and even two years down the line compared to kids who didn't.
Researchers claim this is the first time a study has shown a link between referencing during reading and literary achievement in later life.
An earlier study showed untrained teachers referenced 8.5 times per reading session compared to 36 times for those who were trained.
Parents did it even less typically making only one reference in a 10-minute reading session.
However Dr Piasta, of Ohio State University, said only a 'slight tweak' was needed in what they were already doing to make a difference to their child's reading skills.
More than 300 children took part in her 30-week reading programme as part of Project STAR (Sit Together And Read), a randomised clinical trial to test the short and long-term impacts associated with reading regularly to preschool children in the classroom.
All came from low-income homes, had below-average language skills and were at substantial risk for reading difficulties later on.
They were separated into three groups; high-dose STAR which had four reading sessions per week, low-dose STAR which had two sessions and a third comparison group which also had four sessions a week.
Teachers were trained to make specific print references while reading the same 30 books to their students in the first two groups while teachers in the comparison group were told to read as they normally would and not make specific references.
The results showed that up to two years later children in the high-dose STAR classrooms had higher word reading, spelling and comprehension skills than the children in the comparison group.
The benefits were not as clear for those in the low-dose STAR classrooms but they still seemed to have slightly better skills than those in the comparison group.
Dr Piasta said it was particularly notable that students in the high-dose STAR classrooms scored higher on tests of reading comprehension.
"If you're getting kids to pay attention to letters and words, it makes sense that they will do better at word recognition and spelling.
"But the fact that they also did better at understanding the passages they read is really exciting.
"That suggests this intervention may help them become better readers," she said.
The study was published in the journal Child Development.