Purpose Inadequate literacy is common among patients with diabetes and may lead to adverse outcomes. We reviewed the relationship between literacy and health outcomes in patients with diabetes and potential interventions to improve such outcomes. Methods We reviewed 79 articles covering three key domains: 1) evaluation of screening tools to identify inadequate literacy and numeracy; 2) the relationships of a range of diabetes-related health outcomes with literacy and numeracy; and 3) interventions to reduce literacy-related differences in health outcomes. Results Several screening tools are available to assess patients' print literacy and numeracy skills, some of which specifically address diabetes. Literacy and numeracy are consistently associated with diabetes-related knowledge. Some studies suggest literacy and numeracy are associated with intermediate outcomes, including self-efficacy, communication, and self-care (including adherence), but the relationship between literacy and glycemic control is mixed. Few studies have assessed more distal health outcomes, including diabetes-related complications, health care utilization, safety, or quality of life, but available studies suggest low literacy may be associated with an increased risk of complications, including hypoglycemia. Several interventions appear effective in improving diabetes-related outcomes regardless of literacy status, but it is unclear if these interventions can reduce literacy-related differences in outcomes. Conclusions Low literacy is associated with less diabetes-related knowledge and may be related to other important health outcomes. Further studies are needed to better elucidate pathways by which literacy skills affect health outcomes. Promising interventions are available to improve diabetes outcomes for patients with low literacy, but more research is needed to determine their effectiveness outside of research settings.