This paper reports a study in which Iranian EFL female students' think aloud protocols were analyzed to find out what knowledge sources informed them as they tried to make lexical inference when reading an English text. The study also intended to find out if students' level of their L2 proficiency would affect the pattern of their use of the knowledge sources and if there is a relationship between students' lexical inference ability and their L2 reading performance. Five elementary, five intermediate and five advanced female students were asked to think aloud as they read a text, specifying the knowledge sources they used to guess the meaning of unknown words. They also took a multiple-choice reading test. Results revealed that elementary students used contextual, intralingual and interlingual clues; intermediate students used contextual and advanced students used contextual and intralingual clues in making lexical inference. Though elementary students made the highest number of lexical inference, the highest correct lexical inferencing belonged to advanced students. Overall lexical inference did not show any relationship with the students' reading performance. This study can inspire teachers, textbook writers, and students to attend more to different knowledge sources and lexical inference.