The current study investigated how the prior context influences word segmentation of overlapping ambiguous strings when reading Chinese. Chinese readers' eye movements were recorded as they read sentences containing a three-character overlapping ambiguous string (ABC), where both AB and BC were two-character words. In the informative condition, prior contexts provided syntactic information that supported either the first word segmentation (AB-C) or the second word segmentation (A-BC). The neutral condition did not provide syntactic constraint for word-segmentation. The post-target contexts were syntactically consistent with either the first word (AB-C) or the second word (A-BC) segmentation. The results showed that there were higher skipping rates and shorter first-fixation durations on the overlapping ambiguous string region in the informative AB-C condition than those in the informative A-BC condition, whereas no difference between the AB-C and A-BC segmentation types was found in the neutral condition. Readers still made regressions into the overlapping ambiguous string region in the informative condition. These results imply that readers use sentence context information immediately to segment the overlapping ambiguous words, but they do not use the context information fully. The first word (AB) has processing advantages over the second word (BC), suggesting a left-side word advantage.