Health literacy (HL) is defined as a cognitive and social skill that determines the motivation and ability of individuals to understand and use information to promote and maintain proper health. Inadequate HL has been associated with worse outcomes in diabetes control, poor self-care, and higher hospitalization rates for some chronic diseases. We hypothesized that HL influences the prevalence of diabetic retinopathy (DR) among individuals with type 2 diabetes mellitus (T2DM) and that inadequate glycemic control would mediate this association. This was a cross-sectional study carried out with 288 participants of the "Brazilian Diabetes Study" cohort. Inclusion criteria were people diagnosed with T2DM aged between 40 and 70 years and ability to read and write. In the adequate HL group, DR was found in 16.5% of participants and in the inadequate HL group, it was found in 32.8% (P=0.0081). Individuals with inadequate HL had a higher risk of having DR, and this association was still statistically significant after adjusting for HbA1c, low-density lipoprotein cholesterol, systolic blood pressure, and diastolic blood pressure. In conclusion, HL is related to DR without the mediation of classical clinical variables.