There have been inconsistent findings among studies on the effectiveness of explicit deduction and explicit induction. While a range of variables have been targeted to elucidate how the two instructional types promote L2 development, no prior research has considered two very important variables (i.e., prior knowledge and depth of processing). This study, therefore, examined the possible relationships among type of instruction, prior knowledge, depth of processing, and grammatical knowledge development. Using a pretest-posttest-delayed posttest design, this study collected data from participants in three instructional groups: explicit deduction, explicit induction, and a control group. Concurrent think-aloud protocols were also collected to measure the depth of processing of English subjunctive mood by 69 advanced EFL learners when interacting with a computerized problem-solving task. Results indicated that explicit deduction elicited deeper processing. In addition, both explicit deduction and explicit induction were effective for grammatical knowledge development. Higher depth of processing contributed to better performances. Pedagogical implications are outlined to advance the teaching practice.