Phonological coding plays an important role in reading for hearing students. Experimental findings regarding phonological coding in deaf readers are controversial, and whether deaf readers are able to use phonological coding remains unclear. In the current study we examined whether Chinese deaf students could use phonological coding during sentence reading. Deaf middle school students, chronological age-matched hearing students, and reading ability-matched hearing students had their eye movements recorded as they read sentences containing correctly spelled characters, homophones, or unrelated characters. Both hearing groups had shorter total reading times on homophones than they did on unrelated characters. In contrast, no significant difference was found between homophones and unrelated characters for the deaf students. However, when the deaf group was divided into more-skilled and less-skilled readers according to their scores on reading fluency, the homophone advantage noted for the hearing controls was also observed for the more-skilled deaf students.