<p>Peer feedback has been constantly reported to raise students’ writing performance. Yet relatively little is known about its effect on vocabulary learning. This paper reported a case study of whether and how peer feedback made a difference in Chinese university English as a foreign language (EFL) vocabulary learners’ lexical retention. Participants included 85 first-year lower-intermediate undergraduate students from two classes in a 16-week semester language course taught by the same instructor. Both classes received identical sessions of vocabulary quizzes where students in class one (<i>N</i> = 42) engaged with peer feedback while students in class two (<i>N</i> = 43) received self-assessment after they finished each quiz. Results based on vocabulary tests and self-efficacy questionnaires before and after the intervention showed that students involved in peer feedback practice significantly outperformed their counterpart with self-assessment both in terms of lexical retention and vocabulary learning self-efficacy. However, analysis further revealed that students’ improvements in lexical retention were not only associated with peer feedback itself, but also closely related to their self-efficacy enhanced by the feedback process. These findings indicate the pedagogical potential of peer feedback in vocabulary development of university EFL learners and highlight the significance of increasing students’ self-efficacy in vocabulary learning.</p>