OBJECTIVES: To determine the effect of collaborative care management for depression on physical functioning in older adults. DESIGN: Multisite randomized clinical trial. SETTING: Eighteen primary care clinics from eight healthcare organizations. PARTICIPANTS: One thousand eight hundred one patients aged 60 and older with major depressive disorder. INTERVENTION: Patients were randomized to the Improving Mood: Promoting Access to Collaborative Treatment (IMPACT) intervention (n=906) or to a control group receiving usual care (n=895). Control patients had access to all health services available as part of usual care. Intervention patients had access for 12 months to a depression clinical specialist who coordinated depression care with their primary care physician. MEASUREMENTS: The 12-item short form Physical Component Summary (PCS) score (range 0-100) and instrumental activities of daily living (IADLs) (range 0-7). RESULTS: The mean patient age was 71.2, 65% were women, and 77% were white. At baseline, the mean PCS was 40.2, and the mean number of IADL dependencies was 0.7; 45% of participants rated their health as fair or poor. Intervention patients experienced significantly better physical functioning at 1 year than usual-care patients as measured using between-group differences on the PCS of 1.71 (95% confidence interval (CI)=0.96-2.46) and IADLs of -0.15 (95% CI=-0.29 to -0.01). Intervention patients were also less likely to rate their health as fair or poor (37.3% vs 52.4%, P<.001). Combining both study groups, patients whose depression improved were more likely to experience improvement in physical functioning. CONCLUSION: The IMPACT collaborative care model for late-life depression improves physical function more than usual care.