Background: Cancer patients often experience severe financial distress due to the high cost of their treatment, and strategies are needed to objectively measure this financial distress. The COmprehensive Score for financial Toxicity-Functional Assessment of Chronic Illness Therapy (COST-FACIT) is one instrument used to measure such financial distress. This study aimed to translate the COST-FACIT (Version 2) [COST-FACIT-v2] instrument into traditional Chinese (COST-FACIT-v2 [TC]) and evaluate its psychometric properties. Methods: The Functional Assessment of Chronic Illness Therapy (FACIT) translation method was adopted. The translated version was reviewed by an expert panel and by 20 cancer patients for content validity and face validity, respectively, and 640 cancer patients, recruited from three oncology departments, completed the translated scale. Its reliability was evaluated in terms of internal consistency and test–retest reliability. Confirmatory factor analysis has been used to evaluate the one- and two-factor structures of the instrument reported in the literature. The convergent validity was examined by the correlation with health-related quality of life (HRQoL) and psychological distress. Known-group validity was examined by the difference in the COST-FACIT-v2 (TC) total mean score between groups with different income levels and frequency of health care service use. Results: The COST-FACIT-v2 (TC) showed good content and face validity and demonstrated high internal consistency (Cronbach’s alpha, 0.86) and acceptable test–retest reliability (intraclass correlation coefficient, 0.71). Confirmatory factor analysis showed that the one- and two-factor structures of the instrument that have been reported in the literature could not be satisfactorily fitted to the data. Psychological distress correlated significantly with the COST-FACIT-v2 (TC) score (r = 0.47; p < 0.001). HRQOL showed a weak to moderate negative correlation with the COST-FACIT-v2 (TC) score (r = − 0.23 to − 0.46; p < 0.001). Significant differences were seen among the COST-FACIT-v2 (TC) scores obtained in groups of different income level and frequency of health care service use. Conclusions: The COST-FACIT-v2 (TC) showed some desirable psychometric properties to support its validity and reliability for assessing cancer patients’ level of financial toxicity.