Physical activity and exercise are widely purported to enhance health and minimize or prevent functional loss and disability. Yet, do the benefits of late-life physical activity or exercise extend beyond disease and impairment-level factors? Does late-life physical activity minimize or prevent functional limitations and disability? To address these questions, a best-evidence framework was used to examine the effects of late-life physical activity on disablement outcomes. This review shows that exercise-particularly walking-increases muscle strength and aerobic capacity and reduces functional limitations. It is less clear, however, whether physical activity or exercise prevents or minimizes physical disability. Furthermore, this review shows a discrepancy between prospective and experimental studies: several well-conducted prospective studies show a beneficial effect of physical activity on minimizing disability, whereas the majority of experimental studies that have examined disability as an outcome do not show improvements in disability. Three research priorities are identified that would advance the science in this field: (1). development of a clear conceptual and theoretical framework of late-life physical activity and assessment; (2). use of a disablement outcomes framework to examine the outcomes of late-life physical activity; and (3). development of a mechanism of action explaining the relationship between physical activity and exercise and disablement outcomes.