Introduction This study examines the association between digital literacy and positive psychological functioning among college students, and explores dimension-specific patterns, heterogeneity, and exploratory associational decomposition. Methods Data were obtained from a cross-sectional survey of 893 students from 18 universities in Henan Province, China, conducted in 2024. Digital literacy was operationalized across five dimensions: digital tool use proficiency, information acquisition and processing, digital social interaction, digital innovation, and digital security and ethical awareness. Positive psychological functioning was assessed across six dimensions of psychological functioning and adaptive adjustment. Ordinary least squares models, alternative index-construction methods, wild-cluster bootstrap inference, multiplicity-adjusted exploratory analyses, continuous-variable interaction and non-linearity tests, and a supplementary instrumental-variable-based robustness check were employed. Results Higher overall digital literacy was positively associated with positive psychological functioning. In the adjusted model, a 10-point increase on the rescaled 0–100 digital-literacy index corresponded to approximately a 1.78-point higher score on the 0–100 positive psychological functioning composite, while the model explained a modest proportion of outcome variance. After small-cluster and multiplicity corrections, information acquisition and processing remained negatively associated with positive psychological functioning, whereas digital social interaction remained positively associated; digital tool use proficiency, digital innovation, and digital security and ethical awareness were not robustly associated with the outcome. Exploratory heterogeneity and non-linearity analyses provided no robust evidence of moderation or non-linear functional form after conservative correction, although the living-expense interaction showed suggestive evidence. Exploratory decomposition analyses identified statistically detectable indirect components through digital information regulation behavior, online social boundary practice, and structured digital use practice. Discussion The findings support a cautious, multidimensional interpretation of digital literacy as one correlate of students' psychological functioning rather than as a standalone psychological-intervention.
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