Vocabulary is central to language. Vocabulary knowledge is now recognized as a major factor in language learning, reading comprehension and its evaluation. Vocabulary plays a very important role in reading tests and reading research has consistently found a word knowledge factor on which vocabulary tests load highly.The present study mainly investigated the relationship between vocabulary size, specific vocabulary knowledge and reading comprehension in Chinese EFL setting. The results show that the Vocabulary Levels Test can predict vocabulary size in Chinese EFL setting and it is a more reliable test and can make finer distinctions within the group compared with the traditional vocabulary size test in Chinese research. Moreover, the correlation between VLT and reading comprehension is higher than that of scores on traditional vocabulary size test and reading. It is found that the correlations among specific vocabulary knowledge, vocabulary size and reading comprehension are very high. But specific vocabulary knowledge adds a noticeable prediction in reading comprehension over and above the prediction already afforded by vocabulary size. The additional prediction can be explained by the ability to infer from the context, activating content schemata and the knowledge of polysemy of the words. It is also found that learners often overestimate their understanding of words. The mismatch is due to learners’ unawareness of an unknown word and polysemy of the words. The words with similar forms and with a deceptive morphological structure are especially difficult for the learners to learn.Since vocabulary knowledge plays an important role in reading performance, the use of a dictionary to increase comprehension seems to have rational appeal. However, the previous research provided the contradictory findings. Attracted by the widespread use of electronic dictionaries and motivated by the contradictory findings, the dictionary use during reading was also investigated in the present study to compare with the findings of the previous research. The results show that the access to a bilingual electronic dictionary has a significant effect on the reading scores for bothhigh proficiency group and low proficiency group. It is due to quick access to electronic dictionaries and relatively limited control of vocabulary in English. It is also found that dictionary use largely helped with the microprocessing of the text.