Research studies focusing on schools and teachers' capabilities to teach and develop students' health literacy (HL) are few. Of the research that currently exists, teachers face difficulties when teaching health education to enhance students' critical HL levels, with only one study examining preservice teachers (PSTs). The aim of this study is to explore one Australian University and two of its undergraduate initial teacher education (ITE) programs and the role that it plays in developing PSTs' HL levels and capabilities to plan for promoting students' HL. Twenty-three final year Health and Physical Education (HPE) and thirty-four final year Primary Education participants completed a Health Literacy Questionnaire. Five PSTs from each ITE program consented and were involved in focus group and individual interviews. Current HL levels were found to be higher across all nine sections for HPE PSTs when compared with Primary PSTs, showing medium to very large effect size differences, with all but one section reporting statistical significance. Interviews emphasised the need for ITE programs to focus on developing PSTs' HL levels and to implement authentic opportunities to practice enhancing students' HL. Findings provide insight into the role ITE programs in promoting PSTs' HL before becoming graduate teachers in schools.