Individuals' health literacy (HL) is positively associated with healthy behaviors and global cognitive functioning. Current evidence also suggests that physical activity may prevent or delay cognitive decline and dementia. This study examines the potential mediating role of physical activity in the association between HL and cognition in a population-based sample of adults aged 58+ in Switzerland. We used data from 1645 respondents to Wave 8 (2019/2020) of the Survey on Health, Ageing, and Retirement in Europe in Switzerland. HL was assessed using the HLS-EU-Q16 questionnaire. Mild cognitive impairment (MCI) was defined as a 1.5 SD below the mean of age- and education-specific global cognition score. The frequency of moderate and vigorous physical activity was self-reported. The associations were assessed using probit regression models, controlling for social, health, and regional characteristics. Structural equation modeling was used to test the mediation hypothesis. Higher HL was associated with a higher likelihood of being engaged in moderate (P < .001) and vigorous (P < .01) physical activity and with a lower likelihood of having MCI (P < .05). In addition, both moderate (P < .05) and vigorous (P < .01) physical activity were associated with a lower probability of having MCI. Mediation analysis indicated that the association between HL and MCI was partially mediated by both moderate (12.9%) and vigorous (6.7%) physical activity. Given that physical activity may partially mediate the association between HL and MCI, improving HL in older adults could potentially foster engagement in physical activity, which could, in turn, act as a protective factor against MCI.