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Steps per day were measured by accelerometer for 7 days among 5,545 women aged 63–97 years between 2012 and 2014. Incident falls were ascertained from daily fall calendars for 13 months. Median steps per day were 3,216. There were 5,473 falls recorded over 61,564 fall calendar-months. The adjusted incidence rate ratio comparing women in the highest versus lowest step quartiles was 0.71 (95% confidence interval [0.54, 0.95]; ptrend across quartiles = .01). After further adjustment for physical function using the Short Physical Performance Battery, the incidence rate ratio was 0.86 ([0.64, 1.16]; ptrend = .27). Mediation analysis estimated that 63.7% of the association may be mediated by physical function (p = .03). In conclusion, higher steps per day were related to lower incident falls primarily through their beneficial association with physical functioning. Interventions that improve physical function, including those that involve stepping, could reduce falls in older adults.