OBJECTIVE Older patients with diabetes are more likely to have a higher prevalence of multiple risk factors for physical disability, as a result of diabetic complications. We evaluated the pace of decline in lower-extremity function and the risk for progression of disability in older women with diabetes. RESEARCH DESIGN AND METHODS We conducted a 3-year longitudinal cohort study of a random sample of 729 physically impaired older women (age > or =65 years) living in the community (Baltimore, MD). Diabetes was ascertained by standard criteria. Self-reported functional status and objective performance measures were assessed at baseline and over six semiannual follow-up visits. RESULTS The baseline prevalence of diabetes was 14.4%. After adjustment for age and compared with women without diabetes, those with diabetes had an RR of 1.8 (95% CI 1.3-2.5) for incident mobility disability and 1.6 (1.2-2.1) for incident activity of daily living disability. The increased incidence of new disability associated with diabetes was paralleled by a greater decline in objective measures of lower-extremity function. Adjustment for multiple risk factors for disability did not significantly attenuate the risk for disability associated with diabetes. CONCLUSIONS In older patients, impaired lower-extremity function is a long-term diabetic complication. Comprehensive assessment of older diabetic patients should include a standardized evaluation of lower-extremity performance.