This paper introduces a new observation system that is designed to investigate students' and teachers' talk during literacy instruction, Creating Opportunities to Learn from Text (COLT). Using video-recorded observations of 2^nd-3^rd grade literacy instruction (N=51 classrooms, 337 students, 151 observations), we found that nine types of student talk ranged from using non-verbal gestures to generating new ideas. The more a student talked, the greater were his/her reading comprehension (RC) gains. Classmate talk also predicted RC outcomes (total effect size=0.27). We found that 11 types of teacher talk ranged from asking simple questions to encouraging students' thinking and reasoning. Teacher talk predicted student talk but did not predict students' RC gains directly. Findings highlight the importance of each student's discourse during literacy instruction, how classmates' talk contributes to the learning environments that each student experiences, and how this affects RC gains, with implications for improving the effectiveness of literacy instruction.