Purpose <p>To examine factors associated with mental illness (MI) in people with and without cancer, and the associations between cancer, MI and health literacy (HL).</p> Methods <p>This cross-sectional study was conducted using data from the Australian National Health Survey 2017–2018 and HL Survey. All participants aged ≥ 25&#xa0;years were categorised into four groups based on self-reported cancer and MI. Multivariable logistic regressions were performed to examine characteristics associated with MI, with stratification by cancer status. General linear models were used to assess the association between nine individual HL domain scores and cancer and MI.</p> Results <p>About 30% of people with cancer (<i>n</i> = 690/2276) and 27% of those without cancer (<i>n</i> = 3483/12920) reported having a MI. Several characteristics were associated with higher odds of MI in both cancer and non-cancer groups: female gender, younger age, obesity, currently smoking, residing in a major city, lower socioeconomic status, having more comorbidities and being physically less active. For most of these characteristics, the associated risk was higher in people with cancer. MI was negatively associated with seven individual HL domain scores, whilst having cancer was negatively associated with only one domain.</p> Conclusion <p>Risk factors for MI appeared to be similar in persons with and without cancer, but the associated relative risks are higher in those with cancer. HL is negatively associated with both MI and cancer, with stronger associations for MI. Improving HL in those with MI and cancer has the potential to improve modifiable risk factors and outcomes of this population.</p>