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Background: Functional disability is an emerging public health concern that has an impact on the health and quality of life of older adults. If functional disability recognized early, it will be possible to support them to live independently. Although functional disability is extensively researched in developed countries; studies are scarce in Sub-Saharan Africa, particularly Ethiopia. Therefore, this study aims to assess the prevalence and associated factors of functional disability in activities of daily living among older adults in Gondar town, Ethiopia., Methods: A community-based cross-sectional study was conducted from April to June 2022. Multistage sampling techniques were used to recruit 607 older adults aged 60 years and older. A pre-tested interview-administered questionnaire was used to assess functional disability in basic activities of daily living and instrumental activities of daily living using the Katz Index and Lawton scale, respectively. Bivariate and multivariable logistic regression models were employed. The findings of the study were presented by descriptive statistics and an adjusted odds ratio with 95% CI was used to determine statistical significance., Results: The prevalence of functional disability in basic activities of daily living and instrumental activities of daily living among older adults was 34.5% and 54.4, respectively. Age 80 and older [AOR = 2.41, CI (1.41-4.10)], low-income status [AOR = 2.58, CI (1.50-4.46)], multimorbidity [AOR = 2.97, CI (1.92-4.60)], depression [AOR = 2.97, CI (1.63-5.40)], and low level of physical activity [AOR = 3.31, CI (2.11-5.17)] were associated with basic activities of daily living. Age 80 and older (AOR = 3.11, CI = 1.94-5.00), multimorbidity [AOR = 3.06, CI (2.10-4.46)], and depression [AOR = 3.52, CI (2.10-4.46)] were associated with instrumental activities of daily living., Conclusion and Recommendations: Our study finding revealed that functional disability affects a large number of older adult residents. The age group of 80 years and older, low-income status, a low level of physical activity, multimorbidity, and depression were associated with basic and instrumental activities of daily living. Therefore, health interventions designed to increase older adults' level of physical activity, management of multimorbidity, and depression, more care for elders 80 years and older, and supporting older adults financially for health insurance coverage could be an important strategy to reduce functional disability among older adults., (© 2024. The Author(s).)