This study investigates the effects of topic familiarity and passage sight vocabulary on L2 lexical inferencing in the EFL (English as a foreign language) learning context of Iran. 114 undergraduate university students read four narratives (2 more and 2 less familiar) constructed by Pulido (2000) containing 32 nonsense words. The meanings of the target words were inferred and difficulty in guessing was rated. Analyses of the repeated-measures design reveal (1) a strong impact of topic familiarity and an independent effect of passage sight vocabulary on L2 lexical inferencing, (2) significant impact of passage sight vocabulary and no significant effect of topic familiarity on the perceived difficulty/ease in L2 lexical inferencing, and (3) no significant interaction between topic familiarity and passage sight vocabulary on L2 lexical inferencing and difficulty/ease in L2 lexical inferencing. The significance of the findings pertaining to lexical inferencing is discussed, and practical pedagogical implications and applications are presented.