Adiposity, lean mass, and physical activity (PA) are known to influence physical function in older adults, although the independent influences are not completely characterized. Older adults (N = 156, M age = 68.9 ± 6.7 yr, 85 men) were assessed for body composition via dual-energy X-ray absorptiometry, PA by accelerometer, and physical function via timed up-and-go (UP&GO), 30-s chair stand, 6-min walk (6-min WALK), and Star-Excursion Balance Test. In the absence of percentage-body-fat by PA interactions (p > .05), main effects existed such that a higher percentage body fat was associated with poorer performance in UP&GO, 30-s chair stand, and 6-min WALK (p < .05). No significant main effects were found for PA and functional performance. Adiposity explains 4.6–11.4% in physical functional variance (p < .05). Preventing increases in adiposity with age may help older adults maintain functional independence.