I do reading in small groups (2 kids per group) and I group kids based on similar IEP goals and levels. I differentiate all the books so they are accessible and appropriate for the below three levels/ abilities:
Level 1 books: Have textures and real objects
Level 2 books: Have materials for matching pictures
Level 3: Have materials for matching pictures, answering yes/no questions and comprehension questions with a board
This little chart further explains what kiddos in each level are working on:
Now here are some examples of books that we've adapted for a variety of levels:
Note: Don't worry, I don't call the groups "level 1, 2, 3" or anything like that in the classroom! The kids aren't told their level or anything, I just labeled the levels as a reference for this blog post to show the differentiation!