Introduction of English literature as a separate school subject into Turkish high school curriculum has revealed a huge number of problems during its practical applications: students' low levels of proficiency in English, teacher incompetence, low motivation, lack of confidence, limited resources, lack of materials etc. Given the great extent and multi-sided dimension of the new experience, with the constant interference of a variety of external factors, the focus of this study was narrowed down to identify mainly the primary source of problems in EFL contextualized English literature teaching. To this purpose, two instruments of data collection were used: a teacher questionnaire and English language proficiency test. Analysis of the questionnaire has revealed that, according to English teachers, student-related problems, and particularly students' low proficiency levels, constitute the most important source of problems. The language proficiency test was applied to see whether this finding confirmed or not the teacher opinion about low proficiency levels of students. The test has revealed students' real levels of proficiency in compliance with the Common European Framework of References for Languages (CEFR). It showed that about half of the students' proficiency levels were significantly lower than expected, in this way partly confirming the teacher opinion on low proficiency levels, as the proof of the general inadequacy of students for studying English literature at levels prescribed by the national curriculum. The study has been led to conclude that there is an urgent need to re-adjust English literature curriculum so as to take into account students' real levels of proficiency, and to review or reconsider it in such ways as to prioritize linguistic competence development over the literary.