The present study explored the processing units of high-proficiency second language (L2) Chinese learners in on-line reading in an eye-tracking experiment. The critical aim was to investigate how learners segment continuous characters into words without the aid of word boundary demarcations. Based on previous studies, the embedded words of 2- and 3-character incremental words were manipulated to be either plausible or implausible with the preceding verbs, while the incremental words themselves were always plausible. The results revealed an effect of the plausibility manipulation, which suggested that L2 Chinese learners activated embedded words first and integrated embedded words with previous sentence context as soon as they read them.