There exists insufficient eye-tracking evidence on the differences in emotional word processing between the first language (L1) and second language (L2) readers. This study conducted an eye-tracking experiment to investigate the emotional effects in L2 sentence reading, and to explore the modulation of L2 proficiency and individual emotional states. Adapted from Knickerbocker et al. (2015), the current study recorded eye movements at both early and late processing stages when late Chinese–English bilinguals read emotion-label and neutral target words in natural L2 sentences. Results indicated that L2 readers did not show the facilitation effects of lexical affective connotations during sentence reading, and they even demonstrated processing disadvantages for L2 emotional words. Additionally, the interaction effect between L2 proficiency and emotion was consistently significant for the measure of total reading time in positive words. Measurements of participants’ depressive and anxious states were not robustly correlated with eye movement measures. Our findings supplemented new evidence to existing sparse eye-tracking experiments on L2 emotion processing, and lent support to several theoretical frameworks in the bilingual research field, including the Emotional Contexts of Learning Theory, Lexical Quality Hypothesis and Revised Hierarchical Model.