This study explored the role of morphological awareness and vocabulary knowledge in reading comprehension ability of Chinese as a second language (CSL) learners. Two-hundred and nine CSL students participated in this study and completed a series of measures including two tests of morphological awareness (morpheme discrimination test and compound structure test), a vocabulary knowledge test and a reading comprehension test. Drawing upon path analysis, this study found that morphological awareness contributed to vocabulary knowledge, and vocabulary knowledge is predictive to L2 Chinese reading comprehension. The results also indicated that morphological awareness significantly indirectly contributed to L2 Chinese reading comprehension through the mediation of vocabulary knowledge. Hierarchical regression analysis revealed that although both morpheme awareness and compound structure awareness contributed to vocabulary knowledge and L2 Chinese reading, morpheme awareness made more contribution compared to compound structure awareness.