Health literacy is a crucial factor in determining one's health outcomes. Individuals with high health literacy possess the ability to access, comprehend, evaluate, and utilize health information to maintain, enhance, and advocate for good health. This study aimed to develop and validate a tool called the Health Literacy Questionnaire for Older Adults (HLQ-OA) specifically designed to assess the health literacy of community-dwelling older adults in Taiwan. The development of the HLQ-OA occurred in two phases. Firstly, a systematic literature review was conducted, followed by the evaluation of content validity and face validity through expert and older adult assessments. Subsequently, a cross-sectional study was carried out, involving a convenient sample of 481 older adults from community-dwelling long-term care stations. The final version of the HLQ-OA comprised 16 items that assessed four competencies associated with accessing, understanding, appraising, and applying health-related information. The HLQ-OA demonstrated excellent internal consistency, with an overall Cronbach's α coefficient of 0.94. Additionally, the model fit indices indicated an acceptable fit: RMSEA = 0.046, GFI = 0.909, CFI = 0.945, TLI = 0.939. Furthermore, a high correlation was observed between the HLQ-OA and the HL-SF12 (r = 0.832). These findings support the reliability and validity of the HLQ-OA as a tool for assessing the health literacy of older adults. In conclusion, the HLQ-OA is a reliable and valid instrument that can be effectively utilized to measure the health literacy levels of older adults.