Individual measures of health literacy are not feasible for administration on a large scale, yet estimates of community-level health literacy in the US recently became available. We sought to investigate whether community-level health literacy estimates are associated with the initiation of oral antihyperglycemic agents (OHA) and the use of standard preventive care services among older adults with newly diagnosed diabetes.We conducted a retrospective cohort study of 169,758 patients, ≥65 years old with hypertension and newly diagnosed type 2 diabetes using 2007-2011 data from the Center for Medicare and Medicaid Services Chronic Conditions Warehouse. We examined the relationship between community-level health literacy estimates and initiation of OHA, receipt of flu shots, eye exams, Hemoglobin A1c tests, and lipid tests within 12 months post diabetes diagnosis.Patients living in communities with above basic health literacy (vs. basic/below basic) were 15% more likely to initiate OHA (Hazard Ratio=1.15; 95% CI 1.12 to 1.18). After classifying the health literacy distribution as quintiles, the analysis revealed a dose-response relationship with OHA initiation that plateaued at the third and fourth quintiles and declined at the fifth quintile. Individuals residing in communities with higher health literacy were more likely to participate in preventive care services (relative risk ranged from 1.09 for lipid test [95% CI 1.07-1.11] to 1.43 for flu shot [95% CI 1.41-1.46]).Community-level health literacy estimates were associated with the initiation of OHA and uptake of standard preventive care services in older adults. Community-level health literacy may help to inform targeted diabetes education and support efforts.