I would suggest anything by Roald Dahl (you could start with James and the Giant Peach, or Charlie and the Chocolate Factory). At that age, I was reading them aloud to my daughter and she loved them. They have a lot of humor, great language, not too many scary parts.
I don't know how sensitive your grandson is to scary books (that was a major concern with my daughter) but you may also want to try the first Harry Potter. I see on the Scholastic site that it says 6th grade reading level, but some kids in my daughter's class were reading it by first or second grade.
Also, bear in mind that he doesn't ONLY have to read "hard" books. He can read 6-year-old books, too, he'll just get through them faster!
If he likes mysteries, he can try Encyclopedia Brown (higher reading level) or the A-Z Mysteries (much lower reading level, the first one is The Absent Author).
And for another classic series, try the Boxcar Children.
eP
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