Abstract The Holistic Hypothesis asserts that formulaic expressions (FEs) are processed more rapidly than non-formulaic expressions (non-FE items) by both native speakers (NSs) and L2 learners of English. This study utilized an acceptability judgment task and a self-paced reading task to investigate the online processing of FEs and non-FE items among bilingual speakers (L1 English, L2 Chinese) in both contextual and non-contextual conditions. Meanwhile, a familiarity rating task was employed to measure whether there is a familiarity effect in item processing. The results consistently provided support for the Holistic Hypothesis, indicating that learners of Chinese at each level exhibited faster processing of FEs compared to non-FE items, regardless of the presence or absence of context. However, the influence of item familiarity, rather than the proficiency effect, contributed to the improvement of L2 learners’ eventual processing abilities. Distinct patterns also emerged when comparing data from NSs and L2 learners of Chinese, highlighting L2 learners’ more pronounced processing advantage, characterized by faster response times (RTs) to FEs compared to non-FE items. Through an analysis of Chinese L2 data, this study sheds light on the interplay between the usage based approach and chunking within the cognitive approach to L2 learning.