Translation ambiguity, which occurs commonly when one word has more than one possible translation in another language, causes language processing disadvantage. The present study investigated how Chinese--English bilinguals process translation-ambiguous words, and whether it is affected by the second language (L2) proficiency and sentence context, through translation recognition task. Each ambiguous word was paired with dominant and subordinate translations and categorized into different types according to the semantic similarity between translations. Results revealed that translation-ambiguous words were not well-placed in comparison to unambiguous counterparts, with slower and less successful performance. Dominant translations were processed more quickly and accurately than subordinate translations. As L2 proficiency increased, the higher the semantic similarity between translations was, the quicker the processing of translation-ambiguous words was. Sentences with high semantic constraint brought about a greater effect on ambiguity resolution than those with low semantic constraint, especially for ambiguous words with less semantically similar translations. The current study not only provides an important insight into the processing mechanism of translation-ambiguous words from a new perspective of different-script languages, but also sheds some light on the understanding of sentence context effect on ambiguity resolution.