There is a growing need to understand how health literacy influences health outcomes in diverse populations. The aim of this study was to examine the relationship between health literacy, health behavior, sociodemographic indicators, and self-assessed health in the adult population in Israel while identifying populations at risk for low health literacy. A cross-sectional national survey was conducted among 600 adults randomly selected from a national database. The Health Literacy Survey-Europe-Q16 (HLS-EU-Q16) research instrument, adapted for use in Israel, was the basis for home interviews in Hebrew, Russian, and Arabic. Three levels of health literacy were distinguished: More than 31% of the sample had inadequate or problematic health literacy, and 69% showed likely sufficient health literacy. Logistic regression analyses showed that after we controlled for other determinants, years of education (β = 1.8) and income (β = 2.2) were significantly associated with health literacy. Multinomial logistic regression analysis showed that health literacy, along with age, was the strongest independent variable associated with self-assessed health. Thus, health literacy, strongly influenced by income and years of education, may play a key role in determining self-assessed health, a proxy health outcome, beyond sociodemographic variables. The study results contribute to understanding the role of health literacy in health disparities and identifying action areas for health promotion.