In an experimental design, we investigated how fifth-grade readers use morphological and contextual information to infer the meaning of unknown words, and to what extent this is related to their cognitive and linguistic skills. A group of 166 fifth-grade Dutch children (59 L1, 107 L2) performed a lexical inferencing task in which the availability of morphological and contextual information was manipulated. Readers used both morphological and contextual information in lexical inferencing. Good decoding skill was related to more use of morphological information. Reading comprehension skill was associated with the use of morphological and contextual cues. L1 and L2 readers did not differ with respect to the use of morphological information. L2 readers used contextual information less in their inferences than L1 readers did. This difference was driven by L2 readers with weak vocabulary. The use of contextual information was especially high in L1 readers with good reading comprehension skills, and especially low in L2 readers with low vocabulary. Results indicate that to access morphological information, decoding is crucial, whereas for contextual inferencing, a minimum of linguistic competence is needed, which makes it more challenging for L2 readers.