Background: Limited evidence exists regarding the relationship between health literacy and health-related quality of life (HRQoL) in Australian patients from primary care. The objective of this study was to investigate the impact of health literacy on HRQoL in a large sample of patients without known vascular disease or diabetes and to examine whether the difference in HRQoL between low and high health literacy groups was clinically significant. Methods: This was a cross-sectional study of baseline data from a cluster randomised trial. The study included 739 patients from 30 general practices across four Australian states conducted in 2012 and 2013 using the standard Short Form Health Survey (SF-12) version 2. SF-12 physical component score (PCS-12) and mental component score (MCS-12) are derived using the standard US algorithm. Health literacy was measured using the Health Literacy Management Scale (HeLMS). Multilevel regression analysis (patients at level 1 and general practices at level 2) was applied to relate PCS-12 and MCS-12 to patient reported life style risk behaviours including health literacy and demographic factors. Results: Low health literacy patients were more likely to be smokers (12 % vs 6 %, P = 0.005), do insufficient physical activity (63 % vs 47 %, P < 0.001), be overweight (68 % vs 52 %, P < 0.001), and have lower physical health and lower mental health with large clinically significant effect sizes of 0.56 (B (regression coefficient) = -5.4, P < 0.001) and 0.78(B = -6.4, P < 0.001) respectively after adjustment for confounding factors. Patients with insufficient physical activity were likely to have a lower physical health score (effect size = 0.42, B = -3.1, P < 0.001) and lower mental health (effect size = 0.37, B = -2.6, P < 0.001). Being overweight tended to be related to a lower PCS-12 (effect size = 0.41, B = -1.8, P < 0.05). Less well-educated, unemployed and smoking patients with low health literacy reported worse physical health. Health literacy accounted for 45 and 70 % of the total between patient variance explained in PCS-12 and MCS-12 respectively. Conclusions: Addressing health literacy related barriers to preventive care may help reduce some of the disparities in HRQoL. Recognising and tailoring health related communication to those with low health literacy may improve health outcomes including HRQoL in general practice.