To explore the influence of level of functioning and cognitive status on outcome after rehabilitation for older people with different types of impairment. Design: An inception cohort study. Subjects: A total of 560 older people, mean age 80.0 years, participating in rehabilitation programmes in the Sydney area. Methods: Level of functioning using the Functional Independence Measure (FIM TM), the Barthel Index, cognitive status using the Mini Mental State Examination (MMSE), and type of impairment were assessed on admission. Level of functioning and length of hospital stay were assessed on discharge and after 6 months. Results: Disability on admission was the strongest independent predictor for functioning at discharge (B = 0.35,R 2= 0.49 p < 0.001) and follow-up (B = 0.22,R 2= 0.27, p < 0.001), and for length of hospital stay (B = -0.63,R 2= 0.12, p < 0.001). Cognitive status at admission (mean MMSE 25 (standard deviation 5.3)) was also a significant predictor of functioning at discharge and at follow-up (B = 0.30,R 2= 0.42, p < 0.01). Functional status prior to injury, joint replacement impairment category, and type of hospital had marginal, but statistically significant, impacts on functioning after discharge. Conclusion: Functional status on admission to a rehabilitation facility has stronger predictive value than type of impairment for rehabilitation outcome for older people. Cognitive impairment may have a small adverse effect on rehabilitation outcome.