In the present study, the mediating roles of syllable awareness, orthographic knowledge, and vocabulary skills and the moderating role of morpheme family size in the association between morphological awareness and Chinese character reading were investigated with 176 second-grade Hong Kong Chinese children. In the path analyses, the results indicated significant partial mediating effects of semantic radical function knowledge and vocabulary skills but not of syllable awareness and pseudocharacter identification. A significant moderating effect of morpheme family size was also observed. Children with relatively poor compounding structure awareness performed much more poorly in reading Chinese characters that had a small family size. The mediating and moderating effects documented in the present study can help us understand the mechanism involved in the relationship between morphological awareness and Chinese character reading and provide evidence as a basis for modifying current instruction strategies for improving Chinese children's reading performance.