Objective: This study examined whether three aspects of functioning (i.e., functional limitations, physical performance, and physical activity) were associated with fractures in older men and women. Design: A 3-year prospective cohort study. Participants and setting: A total of 715 men and 762 women, aged 65 years and older, of the population-based Longitudinal Aging Study Amsterdam. Measurements: During an interview at home, three aspects of functioning were assessed: functional limitations (what people say they can do), physical performance, i.e., three performance tests and handgrip strength (what people are able to do), and physical activity (what people actually do). Afterward, a follow-up on fractures was conducted for 3 years. Results: 77 patients (5.2%) suffered a fracture during 3-year follow-up. Most patients suffered a hip fracture (1.6%) or a wrist fracture (1.4%). The fracture rate per 1,000 person-years was 20.1. During 3-year follow-up, a fracture was reported by 12%, 10%, 12%, and 6% of the respondents with functional limitations, low performance test score, poor handgrip strength, and low physical activity, respectively. Using Cox proportional hazard analysis, functional limitations (RR = 3.5; 95%CI, 2.1 to 6.0), low performance test score (RR = 1.9; 95% CI, 1.1 to 3.3), low handgrip strength (RR = 2.5; 95% CI, 1.5 to 4.1), and low physical activity (RR = 1.9; 95% CI, 1.1 to 3.5) were significantly associated with fractures after adjustment for age and sex. Functional limitations (RR = 3.2; 95% CI, 1.8 to 5.5), low performance test score (RR = 1.8; 95% CI, 1.0 to 3.3) and low handgrip strength (RR = 2.0; 95% CI, 1.1 to 3.6) remained significantly associated with fractures after additional adjustment for body composition, chronic diseases, psychosocial factors, life style factors, and the other levels of functioning. No significant interaction terms were found. Conclusions: Functional limitations and poor physical performance were independent risk factors for fractures.