Policies in literacy and health need to address two perspectives: how basic literacy skills influence the health of populations and individuals; and health literacy--the degree to which individuals have the capacity to obtain, process, and understand basic health information and services needed to make appropriate health decisions. There are three potential areas for action to improve literacy and health literacy: the health system, the education system, and within the broader sphere of culture and society. Despite some increasing attention in the last 20 years, low literacy levels remain a major problem in Canada. Policies need to be sensitive to culture, especially among Aboriginal peoples, Francophones and new Canadians. Public policies are needed to: Improve literacy outcomes (for example, support for a pan-Canadian literacy strategy, early childhood education and family literacy programs, and efforts to reduce high school drop out). Improve health literacy (for example, support integrated policy and program development across sectors, integrated research and knowledge translation initiatives, and efforts to build links between literacy and health networks). Reduce disparities by strengthening levels of literacy and health literacy among vulnerable groups.