The study investigated the acquisition of Modern Standard Arabic (MSA) by second language (L2) learners and by heritage speakers of the colloquial varieties of Arabic. The study focused on three questions: (1) whether heritage speakers who enroll in college-level elementary MSA classes have an advantage over their L2 counterparts, (2) whether any potential advantage that heritage speakers may bring into the classroom carries on to a later stage of their MSA learning, and (3) the role of positive or negative transfer from the colloquial variety in the acquisition of MSA in a formal setting. Thirty-five heritage speakers (19 elementary and 16 advanced), 28 advanced L2 learners, and 16 native-speaker controls completed five negation tasks. The results indicated that, whereas elementary heritage speakers entered the MSA classroom with an advantage over their L2 counterparts in the area under study, the advanced heritage speakers exhibited patterns that were comparable to those of the L2 learners. Unlike their L2 counterparts, however, the advanced heritage speakers displayed positive and negative transfer effects from colloquial Arabic. The findings are discussed in the framework of three models/hypotheses of first language transfer to a third language, and their pedagogical implications for Arabic language teaching and learning are explicated.