Increased maternal health literacy (MHL) has contributed considerably to maternal and child health outcomes in many countries. Malnutrition, and low coverage of child vaccination and breastfeeding are major health concerns in Laos, but there is little insight into mothers' literacy on these issues. The aim of this study was to identify the level of MHL of Lao mothers and to explore factors influencing it, in order to provide evidence that can inform policies and planning of health services. A cross-sectional survey was conducted using a questionnaire on health literacy (ability to access, understand, appraise and apply health-related information) in relation to care during pregnancy, childbirth, and the postpartum period. We interviewed 384 mothers with children aged under five years; 197 from urban and 187 from rural areas. Descriptive and inferential statistics were applied to analyze the data. Overall, MHL of Lao mothers was very low in both urban and rural areas; 80% of mothers had either inadequate or problematic MHL, while only 17.4% had sufficient and 3.5% excellent MHL. The MHL scores were significantly higher in urban than in rural areas. One third of mothers found it very difficult to access, understand, appraise and apply information on mother and child (MCH). Health personnel were the main source of MCH information for the mothers. Years of schooling, own income, health status, and number of ANC visits significantly predicted a higher level of MHL (R square = 0.250; adjusted R square = 0.240, P = <0.001). MHL of Lao mothers was inadequate in both urban and rural areas. Socio-demographics and key practices of the mothers were significantly associated with a better level of MHL. Health education on MHL to mothers in both urban and rural areas needs attention, and could best be done by improving the quality of health providers' provision of information.