BackgroundPhysical literacy (PL) is considered an important determinant of children's physical activity through which health benefits may be derived. The purpose of this study is to describe a sample of Canadian children’s baseline levels of PL and movement behaviors, and explore whether the associations between PL and their mental wellbeing, if any, are mediated by moderate-to-vigorous physical activity (MVPA).MethodsAll grade two children in 14 elementary schools in the West Vancouver School District, Canada were invited to participate in a two-year longitudinal project. PL was assessed through PLAYfun and PLAYself tools. Physical activity was measured by wrist-worn accelerometers (GT3X + BT) for seven days. Children's mental well-being was assessed using the Strengths and Difficulties Questionnaire (SDQ). A score of total difficulties was aggregated for internalizing and externalizing problems.ResultsA total of 355 children aged 7–9 (183 boys, 166 girls, 6 non-binary) participated with 258 children providing valid accelerometer data. Children exhibited an average of 111.1 min of MVPA per day, with 97.3% meeting the physical activity guidelines. Approximately 43% (108/250) of participants were meeting the Canadian 24-h movement guidelines. Children were at an ‘emerging’ level of overall physical competence (45.8 ± 5.6) and reported a mean score of 68.9 (SD= 12.3) for self-perceived PL, with no significant differences between boys and girls. PL was significantly associated with MVPA (r= .27) and all SDQ variables (rs = -.26—.13) except for externalizing problems. Mediation analyses showed PL was negatively associated with internalizing problems and total difficulties when the association with MVPA was considered. However, the mediating role of MVPA was found only between PL and internalizing problems, β = -.06, 95%CI [-.12, -.01].ConclusionsAlthough most of our sample was physically active and showed higher adherence to 24-H movement guidelines than comparable population data, the motor competence and self-perceived PL of our sample were similar to those of previous studies. PL has an independent association with children’s internalizing problems and total difficulties. Ongoing assessment will investigate the relationships between PL and children’s mental health from a longitudinal perspective.Supplementary InformationThe online version contains supplementary material available at 10.1186/s12889-023-16050-7.