Abstract Background Health literacy-related challenges are expected to increase with age due to a discrepancy between individual capacity and health care demands. Knowledge about associations between health literacy and age-related health outcomes among older adults is scarce. This is important to address and promote optimal health in older adults. The study aims to investigate the association between health literacy and health status among older adults and explore differences between the younger old and the oldest old adults. Methods Cross-sectional study using SWEOLD population-based data from 2022, a national representative sample of people 77+ years in Sweden. Univariate and multivariate logistic regression analysis assessed associations between communicative- and critical health literacy and health outcomes. Models were adjusted for age, sex, and socioeconomic status, and stratified by age. Results Significant adjusted associations were found between inadequate and problematic health literacy and less than good self-rated health (OR 2.64, 95%CI: 1.61-4.33; 2.11, 95%CI: 1.40.3.17), and requiring assistance with medicine management (OR 5.26, 95%CI: 2.67-10.38, 2.14, 95%CI 1.08-4.22). Among the younger old (77-84 years) inadequate and problematic HL was associated with having lifestyle-related conditions (OR 1.77, 95%CI: 1.07-2.93, 2.75, 95%CI: 1.33-2.71). Among the oldest old (85+), inadequate health literacy was associated with higher likelihood of poor activities of daily living (ADL) (OR 4.48, 95%CI: 1.99-10.07) and frailty (OR 3.51, 95%CI: 1.43-8.47). Level of frailty increases earlier in age for individuals with limited HL than among those with sufficient HL. Conclusions Limited health literacy is a prevalent issue in the older population and is associated with negative health-related outcomes. To mitigate development of poor health and frailty and to promote healthy ageing, care organisations need to meet the needs of this population in a health literacy friendly way. Key messages • Limited health literacy among the older population is associated with several negative health-related outcomes. • Care organisations need to work actively to mitigate the development of poor health while promoting healthy aging among the older population in a health literacy-friendly and age sensitive manner.