Although researchers generally agree that native speakers (NSs) process formulaic sequences (FSs) holistically to some extent, findings about nonnative speakers (NNSs) are conflicting, potentially because not all FSs are psychologically equal or because in some studies NNSs may not have fully understood the FSs. We address these issues by investigating Chinese NSs and NNSs processing of idioms and matched nonidiom FSs in phrase acceptability judgment tasks with and without think-alouds (TAs). Reaction times show that NSs processed idioms faster than nonidioms regardless of length, but NNSs processed 3-character FSs faster than 4-character FSs regardless of type. TAs show NSs’ understanding of FSs has reached ceiling, but NNSs’ understanding was incomplete, with idioms being understood more poorly than nonidioms. Although we conclude that idioms and nonidioms have different mental statuses in NSs’ lexicons, it is inconclusive how they are represented by NNSs. TAs also show that NNSs employed various strategies to compensate for limited idiom knowledge, causing comparable processing speed for idioms and nonidioms. The findings highlight the importance of distinguishing subtypes of FSs and considering NNSs’ quality of understanding in discussions of the psychological reality of FSs.