Identification of primary language impairment (PLI) in sequential bilingual children is challenging because of the interaction between PLI and second language (L2) proficiency. An important step in improving the accurate diagnosis of PLI in bilingual children is to investigate how differences in L2 performance are affected by a length of L2 exposure and how L2 assessment contributes to differentiation between children with and without PLI at different L2 proficiency levels. Sixty one children with typical language development (TD) ages 5;3-8 years and 12 children with PLI ages 5;5-7;8 years participated. Results revealed that bilingual children with and without PLI, who had between 1 and 3 years of L2 exposure, did not differ in mean length of utterance (MLU), number of different words, percent of maze words, and performance on expressive and receptive grammatical tasks in L2. Performance on a grammaticality judgment task by children with and without PLI demonstrated the largest effect size, indicating that it may potentially contribute to identification of PLI in bilingual populations. In addition, children with PLI did not demonstrate any association between the length of exposure and L2 proficiency, suggesting that they do not develop their L2 proficiency in relation to length of exposure in the same manner as children with TD. Results also indicated that comprehension of grammatical structures and expressive grammatical task in L2 may contribute to differentiation between the language ability groups at the low and intermediate-high proficiency levels. The discriminant analysis with the entire sample of bilingual children with and without PLI revealed that among L2 measures, only MLU contributed to the discrimination between the language ability groups. However, poor classification accuracy suggested that MLU alone is not a sufficient predictor of PLI. There were significant differences among L2 proficiency levels in children with TD in MLU, number of different words, and performance on the expressive and receptive grammatical tasks in L2, indicating that L2 proficiency level may potentially impact the differentiation between language difficulties due to typical L2 acquisition processes and PLI.