OBJECTIVE: The purpose of this study was to determine longitudinal predictors of impaired mobility and physical disability in patients with type 2 diabetes. RESEARCH DESIGN AND METHODS: We studied patients with type 2 diabetes who participated in a prospective, community-based study. A wide range of baseline variables were examined to determine whether they predicted future difficulties with 1) mobility and 2) basic activities of daily living (ADLs) in patients free of ADLs difficulty at baseline. To study mobility impairment, subjects with baseline mobility problems were also excluded. RESULTS: After an average 4.6 +/- 2.3 and 4.8 +/- 2.3 years of follow-up in 818 and 934 patients, respectively, 28.5% of subjects had developed new mobility impairment and 18.1% had developed new ADL disability. In Cox proportional hazards models, the risk of mobility impairment was significantly increased by older age (6%/year), peripheral neuropathy (40% increase), stroke history (123%), insulin treatment (117%), albuminuria, and arthritis (82%); taking exercise and being married lowered the risk (by 39 and 32%, respectively). The risk of new ADL disability was increased by baseline mobility problems (222% increase), stroke (92%), claudication (67%), and depression (41%) and was also influenced by age, smoking, lack of exercise, non-fluency in English, and indigenous Australian ethnicity. CONCLUSIONS: Both mobility impairment and ADL disability in type 2 diabetes have multiple causes that are due to diabetes complications and common comorbidities. The specific causes of each functional problem are largely distinct, and different approaches may be required to prevent their onset or progression.