Little is known about why educational inequalities exist in informed decision making in colorectal cancer (CRC) screening. Insight into the role and impact of health literacy is essential for intervention development. This study investigates associations between health literacy and informed decision making in CRC screening and explores to what extent health literacy mediates the association between education and informed decision making in CRC screening. In total, 696 individuals eligible for CRC screening (55–75 years of age) were recruited from online panels and filled in an online questionnaire at T0 (n = 696), T1 (n = 407) and T2 (n = 327). A hypothetical mediation model was tested using structural equation modelling. Outcomes included CRC knowledge, CRC screening knowledge, attitude, injunctive norm, descriptive norm, risk perception, self-efficacy, decisional conflict and decisional certainty. Health literacy domains included Comprehension, Application, Numeracy and Communication. Comprehension, Application and Numeracy, were found to mediate the association between education and knowledge about CRC and CRC screening, injunctive norm, descriptive norm, decisional conflict and decisional certainty. In light of these findings, targeting multiple health literacy domains in decision-support interventions is essential for facilitating informed decision making in CRC screening.