Language-specific features necessitate certain processes and skills in reading. The visually unmarked between-word boundaries in written Chinese render it critical that readers be able to segment words in the continuous texts. It may pose challenges for second language (L2) readers whose first language (L1) is word-spaced. In light of the lack of understanding of Chinese L2 readers' word segmentation, the present study investigated 100 L2 learners' word segmentation performance, the relationships between word segmentation and reading fluency and comprehension, and the differences in the aforementioned relationships among learners with different context-free word recognition abilities. Results demonstrated that L2 learners generally conducted word segmentation well and word segmentation contributed to reading fluency and comprehension beyond context-free word recognition. Word segmentation was the major predictor of reading fluency and comprehension among weak wordlist readers, whereas context-free word recognition made a larger contribution when learners have achieved stronger context-free word recognition ability. The findings suggested the importance of developing word segmentation skills and establishing high quality word representations in Chinese L2 reading instruction.