Little research has been done on the effect of learning context on L2 listening development. Motivated by DeKeyser’s (2015) skill acquisition theory of second language acquisition, this study compares L2 listening development in study abroad (SA) and at home (AH) contexts from both language knowledge and processing perspectives. One hundred forty-nine Chinese postgraduates studying in either China or the United Kingdom participated in a battery of listening tasks at the beginning and at the end of an academic year. These tasks measure auditory vocabulary knowledge and listening processing efficiency (i.e., accuracy, speed, and stability of processing) in word recognition, grammatical processing, and semantic analysis. Results show that, provided equal starting levels, the SA learners made more progress than the AH learners in speed of processing across the language processing tasks, with less clear results for vocabulary acquisition. Studying abroad may be an effective intervention for L2 learning, especially in terms of processing speed.