The present study investigated the applicability of word reading, word segmentation, and text reading as diagnostic tools to assess comprehension, detect struggling readers, and inform instruction for low-level Chinese as second language (L2) learners (n = 70). The results showed that the three instruments measured different dimensions of word recognition and predicted text comprehension. Text reading was the most robust indicator of comprehension and the most sensitive screener for weak readers. The diagnostic instruments provided interpretable feedback, located problems at specific areas, and evaluated instructional material difficulty level. The findings offer empirical support for the use of text reading for diagnostic purposes in Chinese low-level L2 reading instruction and suggest the importance of helping students develop word recognition skills.