Background. The role of chronic medical conditions in elderly persons' loss of functional abilities is intuitively important but not well defined. This analysis was designed to identify chronic medical conditions that lead to the development of severe functional limitation. Methods. Functionally intact members of a multistage probability sample (n = 6,862) of all noninstitutionalized U.S. civilians age 70 years or older were interviewed in 1984. Based on data from the National Death Index and from follow-up telephone interviews in 1988 with survivors, subjects were classified as functionally intact, functionally limited (unable to perform one or more of seven essential activities), or deceased. Results. After adjusting for the effects of exercise habits and demographic, socioeconomic, and psychosocial factors, we found that the best predictors of the development of functional limitation were cerebrovascular disease (OR = 2.14; 95% CL = 1.16, 3.98) and arthritis (OR = 1.51; 95% CL = 1.08, 2.11). The contribution of coronary artery disease also approached statistical significance (OR = 1.49; 95% CL = 0.99, 2.27). Conclusion. In the future, the primary prevention or effective treatment of cerebrovascular disease, arthritis, and possibly coronary artery disease may produce a modest reduction in the incidence of severe functional limitation.