This mixed-methods study explores the self-regulation of two Japanese university students in response to the stressful situation of feeling unable to communicate effectively in English with foreigners. Qualitative data from interviews are used to interpret the quantitative results of the two students, who were part of an online intercultural Japan-Canada university exchange in which half of the communication was in English. Due to the reality check of using English for communication with foreigners, both students realized that their English communication skills were weak. Self-efficacy and coping strategies modeled by peers were internalized by one student who could subsequently cope with the demands of interacting in English, and who developed a challenge orientation and set a new goal as a result. The other student became demotivated and withdrew over time. Theories related to stress and coping, self-efficacy, peer modeling, internalization, self-regulation, and possible selves are incorporated to provide a multidimensional view of the processes involved in the self-regulation of these students. By looking at the experiences of the two students at the individual level, insight may be gained into the reasons behind student engagement in and withdrawal from L2 learning processes. In particular, the importance of peer modeling to positive changes in student actual and ideal selves is examined.