Objectives: Low health literacy has been identified as an important factor linked to negative health outcomes. However, little research has analyzed the relationship between parental health literacy and children's health outcomes. This is particularly true regarding subgroups of immigrant families, which often face a greater risk of low health literacy and high health disparities. The present study aimed to address this gap by investigating the functional health literacy levels of immigrant and US-born parents and the relation of these functional health literacy levels to child health status. Methods: The 2007 California Health Interview Survey (CHIS) was used to identify 5877 parents and their children aged 4–10 years. Parental functional health literacy level was assessed using two proxy items. Children's health outcomes were measured by parents’ self-report. Weighted univariate, bivariate, and multivariate analyses were conducted using STATA 12.0. Results: Latino US-born, Latino immigrant, and Asian immigrant parents reported significantly lower health literacy levels than their Asian US-born and non-Latino white US-born peers, who reported the highest health literacy levels. Higher parental functional health literacy was a significant correlate of positive child health outcomes only for children of Latino US-born, Latino immigrant, and Asian immigrant parents. Conclusions: Parental functional health literacy levels varied significantly between groups. However, parental health literacy was significantly related to child health only for the groups that reported lower parental health literacy levels. Customized health literacy educational messages and intervention strategies should be developed to raise parental health literacy regarding their children in Latino US-born, Latino immigrant, and Asian immigrant parents.