Objective: Functional limitation is a major factor in medical costs. This study was undertaken to evaluate the prevalence of functional limitation among adults with arthritis and the frequency of functional decline over 2 years, and to investigate factors amenable to public health intervention that predict functional decline., Methods: Longitudinal data (1998-2000) from a cohort of 5,715 adults ages 65 years or older with arthritis from a national probability sample were analyzed. Function was defined based on ability to perform basic activities of daily living (ADL) tasks and instrumental ADL. Adjusted odds ratios (ORs) from a multiple logistic regression model were used to estimate the associations between functional decline and comorbid conditions, health behaviors, and economic factors., Results: Overall, 19.7% of this cohort had functional limitation at baseline, including 12.9% with ADL limitations. Over the subsequent 2 years, function declined in 13.6% of those at risk. Functional decline was most frequent among women (15.0%) and minorities (18.0% Hispanics, 18.7% African Americans) with arthritis. Lack of regular vigorous physical activity, the most prevalent risk factor (64%), almost doubled the odds of functional decline (adjusted OR 1.9, 95% confidence interval 1.5-2.4) after controlling for all risk factors. It was found that if all subjects engaged in regular vigorous physical activity, the expected functional decline could be reduced as much as 32%. Other significant predictors included older age, cognitive impairment, depressive symptoms, diabetes, physical limitations, no alcohol use, stroke, and vision impairment., Conclusion: Lack of regular vigorous physical activity is a potentially modifiable risk factor that could substantially reduce functional decline and associated health care costs. Prevention/intervention programs should include regular vigorous physical activity, weight maintenance, and medical intervention for health needs. (c) 2005, American College of Rheumatology.