Introduction: This research aims to investigate the impact of students’ language assessment literacy (LAL) on their cognition. The study specifically examines how different levels of LAL influence two critical factors: test anxiety and motivation to learn a second language. Methods: To achieve the research objectives, a questionnaire was administered to a sample of 415 university students in China. The questionnaire utilized a five-point Likert scale to assess students’ levels of LAL, test anxiety, and motivation to learn a second language. Descriptive data were examined to reveal students’ proficiency in LAL, along with their levels of test anxiety and motivation. Multilevel regression analyses were performed using Mplus to investigate whether students’ LAL proficiency can predict their levels of test anxiety and motivation. Results: The findings indicated that the participating students had a proficiency level of approximately 60% in the content of the LAL questionnaire. The analysis further revealed the relationships between specific dimensions of LAL and both test anxiety and second language motivation. The multilevel regression analysis suggested that theoretical knowledge about language and language learning, the understanding of the impact and social value of language assessments, and the uses of assessments to enhance learning, positively predicted students’ extrinsic motivation. Furthermore, students’ understanding of the uses of assessments to learn and their theoretical knowledge about language learning were identified as positive predictors of intrinsic motivation. Additionally, it was observed that students’ LAL did not significantly predict test anxiety. Discussion: These findings emphasize the significance of enhancing students’ LAL due to the identified relationships between LAL dimensions and motivation to learn a second language. The study suggests pedagogical implications for improving LAL, with a focus on specific dimensions that positively impact students’ motivation. The absence of a significant relationship between LAL dimensions and test anxiety prompts further exploration and consideration of additional factors influencing students’ anxiety in language assessments.