Background: Health literacy is an important behavioral factor for promoting health and disease prevention. This study aimed to examine whether health literacy affected health outcomes in China’s floating population and whether health service utilization had a mediating effect between health literacy and health outcomes. Method: A cross-sectional study was carried out in Zhejiang Province, China, in November and December 2019. Self-reported questionnaires were used for data collection, which included sociodemographic characteristics, health literacy, health outcomes, and health service utilization. On the basis of reliability testing, confirmatory factor analysis was used to test questionnaire validity. Descriptive statistics were used to understand the demographic characteristics of the floating population, and structural equation modeling was used for the mediation test to check whether health service utilization had a mediating effect between health literacy and health outcomes. Results: There were positive correlations between health literacy, health service utilization, and health outcomes; correlation coefficients ranged from 0.165 to 0.944. Mediation analysis showed that health service utilization had partial mediating effects between health literacy and health outcomes. In the relationship between health literacy and health outcomes, the indirect effects of health service utilization accounted for 6.6%–8.7% of the total effects. Conclusion: Health service utilization has partial mediating effects between health literacy and health outcomes. Health literacy affects the proactiveness of health service utilization in the floating population through healthcare literacy and health promotion, thereby affecting health outcomes.