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Through Structural Equation Modeling analysis, we examined the direct and indirect effects of morphological awareness on ESL reading comprehension. With a focus on young Chinese-speaking ESL learners, we found that derivational awareness was a unique and significant predictor of ESL reading comprehension over and above the influence of learners’ lexical knowledge; it also had a significant indirect effect on ESL reading comprehension, largely through the mediation of learners’ vocabulary knowledge, but not their derived word decoding fluency.