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This study examined morphological awareness development and reading comprehension in Chinese children learning English as a foreign language. Morphological awareness was defined as consisting of both basic and refined facets. Results showed that basic-facet inflectional awareness was better than corresponding derivational awareness; compound awareness was better than derivational awareness, for both basic and refined facet; and the difference between compound and derivational awareness was narrower for the basic facet than the refined facet. Morphological awareness significantly predicted reading comprehension over and above vocabulary knowledge. These findings confirmed that L2 morphological awareness is a result of the joint function of L2 lexical exposure and L1 morphological experience, and morphological awareness is also an important skill that supports L2 reading comprehension.