Like many other peoples in East Asia, like the Koreans and the Japanese, the Khitan adopted the Chinese script as their writing system, and naturally wrote a large part of the literature in Chinese, especially political decretes, memorials within the Chinese-styles administration system, but also an important literature genre of the Confucian-educated elite, the poesy. Poems of famous Chinese writers like Bai Juyi 白居易, or Su Dongpo 蘇東坡, were admired, imitated or translated into Khitan. Liao poetry can be admired in the poems of Empress Yide 懿德皇后 (Xiao Guanyin 蕭觀音), Lady Xiao Sese 蕭色色, or Princess Yelü Changge 耶律常哥. Emperors are reported to study the Tang administrative book Zhenguan zhengyao 貞觀政要 and the Five Confucian Classics (Wujing 五經). Only very few relics of Khitan poems and literature are preserved, and much less texts or fragments in Khitan language. The use of the Khitan script (see below) was limited, and only few people mastered this script. In recent years, more Khitan literature was unearthed from tombs in the old Liao region, but because the Khitan language is still not fully reconstructable, there are many problems in reading and interpreting Khitan language documents. In the sphere of historical documents like annals, decretes, and memorials in Chinese language, not much is preserved but we know that the official dynastic history of the Liao empire, the Liaoshi 遼史, compiled under the Mongol Toqtohan (Chinese: Tuo Tuo 脫脫), is based on several earlier veritable records (shilu 實錄) compiled during the Liao period. The only preserved private writing of the Liao time is Wang Ding's 王鼎 Fenjiaolu 焚椒錄 "Burning Peppers", an account of the case of witchcraft around Empress Xuanyi 宣懿皇后. Others like the "Collections of the Western Pavillion" (Xitingji 西亭集) by Yelü Zizhong 耶律資忠 are lost. In the sphere of religious literature a Buddhist canon was compiled, commented, and printed by woodblocks, Dazangjing 大藏經, later a second edition called Khitan Canon (Danzang 丹藏). The most important book compiled by a Buddhist monk of the Liao period is the Longkan shoujing 龍龕手鏡 (later shoujian 手鑒) "Hand mirror for the dragon niche", written by Xingjun 行均, a dictionary that reflects the popular characters, writing style, and pronunciation of more than 26,000 Chinese characters
The Khitan script was created around 920 AD under the guidance of Yelü Tulübu 耶律突呂不 and imitated the shape of Chinese characters. This first script is called the Large Khitan Script and borrows many Chinese characters without changing their original appearance, while also other characters are derived from a Chinese character and are changed slightly, and a third group of characters has no Chinese origin or counterpart but was invented independently. Like the Chinese script, the Large Khitan Script is logographic, that means every character expresses a word. But because the Khitan language is not related to the monosyllabic Chinese (one word - one syllable - one character) but belongs to the Altaic languages that are highly agglutinating (one word - many syllables) the Chinese logographic script does not provide an ideal writing system for Khitan. For the same reason the Koreans and Japanese invented their own writing systems (see Japanese Kana). Yelü Diela 耶律迭剌, brother of the first Khitan emperor Yelü Abaoji 耶律阿保機 (posthumous title: Liao Taizu 遼太祖) therefore created a new script based on the shape of Chinese characters and on the Uyghur alphabet (that was on its one side based on the Syrian alphabet). This Small Khitan Script was promulgated in 925 AD and was used parallel to the Large Khitan script, although we possess more documents in the Small Script. It is called "small" because the character units of this script are components of phonetic parts, instead of logograms. The Small Khitan script is consisting of syllabograms, but also of components that consist of a logographic part (a symbol) and a pure syllabic part (a sound). Both scripts were used until the end of the Khitan empire and were partially incorporated into the Jurchen script. The Khitan script was officially given up in 1191 by the Jurchen.

Title of a Kitan-Chinese bilingue stele kept in the Research Institute of East Asian Culture of the Tokyo University (Tōkyō Daigaku Tōyō Bunka Kenkyūsho 東京大学東洋文化研究所), the right column is in Small Kitan Script, the left in Chinese, the text is: 道宗仁聖大孝文皇帝哀冊 "Mourning note of [Liao] Daozong ("Well-lead Ancestor"), the human and holy, deeply reverent and cultured emperor"

Emperor Shengzong 遼聖宗 was the first Khitan ruler to install the system of state examinations (keju 科舉) and promotion by recommendation (gongju 貢舉) for the recruitment of Chinese officials in the Liao administration in the 980es. The highest number appointed officials ever was 138, but usually the numbers of graduates were substantially smaller. Scholars were examined on the district level (xiangshi 鄉試), prefectural level (fushi 府試), state department level (shengshi 省試) and in on the palace level (dianshi 殿試). These examinations, rewarded with the jinshi 進士 degree, were only to be made by Chinese.
For their education, the dynastic founder, Emperor Taizu 遼太祖 had already founded state academies in the capital, a Guozijian 國子監, and adherent Guozixue 國子學, and ordered the erection of a central Confucius Temple (Kongzimiao 孔子廟) as a place of veneration for this saint of Chinese culture and learning. His successors founded a second state academy in the new capital, the Taixue 太學 and Wangjingxue 王京學, after the adoption of the five-capital system there was an academy in every capital. The study of Confucian classics was the main teaching material inside these state academies. The Liao emperors also founded prefectural schools (zhouxue 州學) throughout their empire where students were supported by a state scholarship (guanfei yangshi 官費養士), local officials also installed district schools (xianxue 縣學) in many places. Teachers in the state owned schools (guanxue 官學) were Chinese that were either captives like Wu Bai 武白 or people who employed as subjects of the newly conquered territories.
The princes at the Khitan court were guided by Chinese teachers and learned Chinese customs, thought and philosophy, and studied the Confucian Classics. Khitan princes, princesses, empresses and consorts were able to write Chinese poems, and some possessed large libraries like Yelü Bei 耶律倍 in his Wanghaitang Hall 望海堂 on top of Mt. Yiwulü 醫巫閭山. This kind of private learning was also undertaken by non-aristocrats like the writer Wang Ding 王鼎 who was owner of a large library. Encited by the technique of book printing, much Confucian literature and other types of writings were circulating within the Liao empire, among these writings many books for primary school (mengxue 蒙學) like Sanzijing 三字經, Qianziwen 千字文 an Li Ao's 李翺 Mengqiu 蒙求, but also a huge amount of Buddhist sutras like the Lotus Sutra 妙法蓮花經.