This study, conducted in a third-grade classroom in Puerto Rico, analyzed the development of literature discussions, in which through dialogues with the teacher and each other, students learn how to discuss, analyze, and reflect upon what they are reading in class, and relate what they learn to their own circumstances. A combination of three theoretical perspectives served as guide: Reader Response Theory (RRT), which addresses how the dialogue featured in literature discussions helped develop understandings about how power, ideology and identity are interwoven in society; Postcolonial Theory (PT) and Critical Race Theory (CRT), which addresses the dynamics and relations of power in neo-colonial contexts, such as Puerto Rico. The research questions were as follows:1. How do literature discussion and critical literacy practices influence students' understandings of social issues? a) How do these discussions about social issues influence students' understandings of Puerto Rican society and identity? b) How do these discussions influence students' understandings of how political relations constitute Puerto Rican reality? c) How do students take action based on their developing understandings of society? I relied on ethnographic methods, such as participant-observation, interviews, and videotapes of literature discussions, to document how the students, with the help of their teacher, develop discourse practices that allow them to reflect, analyze and discuss their readings, and then plan and take social action on the issues they have studied. I used Critical Discourse Analysis (CDA) as a central strategy of analysis, identifying three major categories that formed part of a broader Identity Theme: Personal, Gender, and Social. A significant aspect of the study is that literature discussions of books based on social issues provide multiple opportunities to reflect, create dialogue, and build understanding about who we are in our current society, who the others are, and provide spaces to develop as social agents. This production of spaces for reflecting on reality, central to this study, fosters in the students a deep process of constructing meaning, elaborates their skills and strategies in reading for a critical understanding of texts and related social issues, and enhances their taking of action for social change.