To investigate the impact of digital literacy on the health of older adults, based on the four-wave micropanel data from the China Family Panel Studies, a digital literacy indicator system was constructed using the factor analysis method. The health of older adults was characterized from the perspectives of overall health levels and internal health inequalities among older adults, and the theoretical mechanism was empirically examined through fixed-effects regression, threshold, and moderating-effects models. Policy recommendations are proposed to accelerate the construction of a digital literacy cultivation system for the elderly, promote digitally empowered public health services, and encourage age-appropriate upgrading of digital health facilities. The results show that for every 1-unit increase in digital literacy, the overall self-assessed health level of the elderly increases by approximately 0.052 units on average, and the health relative deprivation index, which reflects health inequalities of older adults, decreased by about 0.013 units on average. There was heterogeneity in the effect of digital literacy on the health of the elderly, which was more significant among rural-dwelling elderly people, those aged more than 65 years, and females. The mechanism analysis shows that the variables reflecting medical experience and health management awareness play a moderating role in channels through which digital literacy affects older adults’ health.