To understand how body composition relates to functional impairment, the authors examined cross-sectional associations of absolute and relative measures of fat and lean mass with physical performance and self-reported functional limitation. The sample consisted of a community-based cohort of 1,655 older women and men from Sonoma, California, who had complete baseline data in 1993-1994 on body composition, physical performance, and functional limitation. Physical performance was assessed by walking speed and grip strength, while global functional limitation, across several domains, was assessed by self-report using standard questions. Lean mass and fat mass were estimated from bioelectric impedance using population-specific prediction equations derived from dual x-ray energy absorptiometry. Higher fat mass was associated with slower walking speed and greater likelihood of functional limitation, while higher lean mass was generally associated only with increased grip strength. A higher lean mass-to-fat mass ratio, a relative measure of body composition, was associated with faster walking speed and less limitation. These findings suggest that fat mass negatively impacts some domains of physical performance and overall functioning, while lean mass is less significant in absolute terms but is important relative to amount of body fat.