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Problem: Nurses are fundamental in presenting information to their patients to ensure understanding of information, and health directions enabling improved health outcomes. Limited research exists exploring how nurses assess patient's health literacy in Australia. Aim: To explore Australian nurses' perceptions of patients' health literacy and how nurses assess health literacy to provide patient education. Design: A qualitative study underpinned by phenomenology. Methods: Registered Nurses (N = 19) across five Queensland hospitals participated in semi‐structured interviews which explored nurses' assessment of patient's health literacy level and their practices of delivering education. The transcripts were analysed using an inductive process with interpretative analysis. Results: Four themes were identified: how we assess patient health literacy; challenges with health literacy assessment; consumer focused assessment; and building assessment strategies. Participants relied on cues from the patient to identify when information has not been understood. Participants felt that online training programs in the workplace would assist in education for assessment techniques; identification of patients with low health literacy; and how to best communicate with patients that have low health literacy. Conclusion: Formal health literacy assessments should be introduced to hospitals in Australia, but training is required to enable the nurse, the confidence and ability for health literacy assessment. Tailored education based on health literacy assessment would enhance the patient's understanding and improve discharge planning, which may reduce health service costs and readmissions. Reporting method: The Consolidated criteria for reporting qualitative research (COREQ) guidelines for qualitative research were followed. Patient or public contribution: Registered Nurses (N = 19) participated in qualitative interviews, providing data for analysis. Relevance to clinical practice: This study shows that nurses are already conducting informal assessments, simply by using observation and looking for cues. More education for nurses about health literacy and how to tailor their discussions with patients will improve communication. [ABSTRACT FROM AUTHOR]