This study explores how comprehension strategies, first language (L1), and contextual information affect the comprehension and interpretation of three types of colloquial idioms by Chinese as a second language (L2) learners at an advanced level of proficiency. Three research questions are addressed: (1) to what extent does context affect the comprehension and interpretation of three types of Chinese colloquial idioms, (2) to what extent does the degree of L1–L2 similarity influence the comprehension and interpretation of the Chinese colloquial idioms, and (3) what strategies are employed by the learners in comprehending the Chinese colloquial idioms in isolation and in context, and which strategies contribute to better comprehension of the Chinese colloquial idioms in context. To address these research questions, 30 advanced Chinese L2 learners at a Midwest University participated in the study. They were asked to comprehend 15 unknown colloquial idioms in and out of context. All of the participants were native speakers of English. The 15 target idiomatic phrases differed in terms of the degree of L1–L2 similarity, including 5 matching idioms, 5 partially matching idioms, and 5 non-matching idioms. In the decontextualized condition, the participants were given a list of the target colloquial idioms without contextual information, whereas in the contextualized condition, the target colloquial idioms were embedded in short paragraph context. For both tasks, the individual participants were required to verbalize their thought processes as they arrived at the meanings of the target colloquial idioms. Think-aloud protocols were employed to collect qualitative data. It was discovered that context substantially facilitated the comprehension processes of the target colloquial idioms, especially with respect to the partially matching category. The degree of L1–L2 similarity significantly affected the ease with which the participants understood the Chinese colloquial idioms in the decontextualized and contextualized tasks. In the decontextualized condition, the participants generally adopted a “part-to-whole and literal-to-figurative” approach to interpret the target items, whereas in the contextualized condition, the participants adopted a heuristic method and employed a wide range of strategies (e.g., sentence translation, component words, and background knowledge) to access meaning of the target idioms. Among the strategies identified, semantic processing and pre-existing knowledge were strong predictors of accurate idiom interpretation. Instead of using existing L1 idiom comprehension models to explain the comprehension of idioms in an L2, a tentative model of idiom comprehension was proposed. L2 learners appeared to undergo two stages in comprehending unknown Chinese colloquial idioms: an initial prediction stage and a verification stage.