The aim of this study was to investigate the mental processes university students followed while reading short stories. It also sought to find the common problems in reading and understanding short stories and how linguistic and extralinguistic factors formed those challenges. The total number of the participants was 15 (seven males and eight females) in three public universities in Iraqi Kurdistan. The data were recorded and collected among second year university students who were enrolled in an English short stories course in the second year of their studies in the 2014-2015 academic year. To collect the data, a think-aloud protocol was developed and questions about the text were answered verbally by the participants. A qualitative approach was adopted to analyse the obtained data descriptively. The results indicated the fact that some reading strategies were employed by the learners, these strategies were not adequate for them to fully analyse the text in a literary manner. More specifically, they attempted to answer literary questions in the same way that they answered general reading comprehension questions. The analysis of the data also revealed that lack of vocabulary was a major issue for the learners' inability in answering questions correctly. It was also found that the learners were influenced by their own cultural backgrounds and the social norms that they have been exposed to while reading and analysing short stories.