INTRODUCTION: Japan has the fastest ageing population worldwide, with a high prevalence of frailty. This study aimed to investigate the impact of communicative and critical health literacy (CCHL) on the progression of frailty in older adults participating in community-based programs over 1 year, and whether instrumental activities of daily living (IADL) mediate this relationship. METHODS: This retrospective cohort study used data from the Matsumoto City Frailty Prevention Project, involving 373 older adults aged 65 years and over. Health literacy was measured using the CCHL scale, and IADL was assessed using the Tokyo Metropolitan Institute of Gerontology Index of Competence (TMIG-IC), which includes five items of IADLs. Frailty was classified using the Japanese version of the Cardiovascular Health Study (J-CHS) criteria. Mediation analysis was used to evaluate the role of IADL in the relationship between health literacy and frailty. RESULTS: Participants with higher CCHL had significantly better IADL scores (coefficient = 0.127, P = 0.043) and were less likely to progress to frailty (odds ratio: 0.546, P = 0.009). Mediation analysis revealed that IADL accounted for approximately 10.7% of the total effect of health literacy on frailty progression (P = 0.030). CONCLUSION: Higher CCHL reduces the risk of frailty progression, with IADL playing a mediating role. Interventions targeting both health literacy and IADL may effectively prevent frailty in older adults.