Teleological reasoning is the tendency for humans to see purpose and intentionality in natural phenomena when there is none. In this study, we assess three competing theories on how bias in reasoning arises by examining performance on a teleological reasoning task while measuring pupil size and response times. We replicate that humans (N = 45) are prone to accept false teleological explanations. Further, we show that errors on the teleological reasoning task are associated with slower response times, smaller baseline pupil size, and larger pupil dilations. The results are in line with the single-process extensive integration account and directly oppose predictions from dual-processing accounts. Lastly, by modeling responses with a drift-diffusion model, we find that larger baseline pupil size is associated with lower decision threshold and higher drift rate, whereas larger pupil dilations are associated with higher decision threshold and lower drift rate. The results highlight the role of neural gain and the Locus Coeruleus-Norepinephrine system in modulating evidence integration and bias in reasoning. Thus, teleological reasoning and susceptibility to bias likely arise due to extensive processing rather than through fast and effortless processing.