OBJECTIVES: To describe the changes in activities of daily living (ADL) function occurring before and after hospital admission in older people hospitalized with medical illness and to assess the effect of age on loss of ADL function. DESIGN: Prospective observational study. SETTING: The general medical service of two hospitals. PARTICIPANTS: Two thousand two hundred ninety-three patients aged 70 and older (mean age 80, 64% women, 24% nonwhite). MEASUREMENTS: At the time of hospital admission, patients or their surrogates were interviewed about their independence in five ADLs (bathing, dressing, eating, transferring, and toileting) 2 weeks before admission (baseline) and at admission. Subjects were interviewed about ADL function at discharge. Outcome measures included functional decline between baseline and discharge and functional changes between baseline and admission and between admission and discharge. RESULTS: Thirty-five percent of patients declined in ADL function between baseline and discharge. This included the 23% of patients who declined between baseline and admission and failed to recover to baseline function between admission and discharge and the 12% of patients who did not decline between baseline and admission but declined between hospital admission and discharge. Twenty percent of patients declined between baseline and admission but recovered to baseline function between admission and discharge. The frequency of ADL decline between baseline and discharge varied markedly with age (23%, 28%, 38%, 50%, and 63% in patients aged 70-74, 75-79, 80-84, 85-89, and ≥90, respectively, P < .001). After adjustment for potential confounders, age was not associated with ADL decline before hospitalization (odds ratio (OR) for patients aged ≥90 compared with patients aged 70-74 = 1.26, 95% confidence interval (CI) = 0.88-1.82). In contrast, age was associated with the failure to recover ADL function during hospitalization in patients who declined before admission (OR for patients aged ≤90 compared with patients aged 70-74 = 2.09, 95% CI = 1.20-3.65) and with new losses of ADL function during hospitalization in patients who did not decline before admission (OR for patients aged ≥90 compared with patients aged 70-74 = 3.43, 95% CI = 1.92-6.12). CONCLUSION: Many hospitalized older people are discharged with ADL function that is worse than their baseline function. The oldest patients are at particularly high risk of poor functional outcomes because they are less likely to recover ADL function lost before admission and more likely to develop new functional deficits during hospitalization.