Most research on peer observation as a professional development intervention in EFL contexts focuses either on teachers' perceptions about its usefulness or the methodical frameworks. There are a few studies which report real-time incidence of a peer observed lesson. To fill this gap, the present study arranged a peer observation for a reading lesson on top-down processing skills to reflect upon the strengths and weaknesses of the lesson as well as develop the reading literacy of the students. The peer observation method included a pre-observation stage with the teacher and the observer deciding on the modalities of observation. The second stage was the lesson which was peer observed followed by the post-lesson reflection stage. The results obtained through teachers' reflection on different aspects of the lesson and the peer observer's report revealed that most stages and activities of the lesson went as planned except for the final where issues of activity management, teacher feedback, and coherent lesson progression came up to the fore. The study has significance for EFL practitioners interested in initiating self-directed professional development through peer observation in particular and for researchers of professional development studies in general.