My son is also in Grade 1 and reading at about Grade 2 level. He has enjoyed recently:
-Bad Kitty (Nick Bruel) not exactly a chapter book but lots of fun!
-AMazing world of Stuart (Sarah Pennypacker)
-Pokemon (the Jr. books and the chapter books)
-Franny K Stein (Jim Benton)
He also enjoys graphic novels (Star WArs, Bone)
My daughter was not as strong a reader at that age but in Grade 2 she enjoyed:
-The Rainbow Fairies books (yawn for me but she enjoyed them)
-the Disney Fairies books (more difficult that the Rainbow fairies but the stories were much more interesting)
-Stink Moody (same author as Judy Moody)
Enjoy! I like reading many of the books along with the kids!!