Background: Diabetes-related disability occurs in approximately two-thirds of older adults with diabetes and is associated with loss of independence, increased health care resource utilization, and sedentary lifestyle. The objective of this randomized controlled trial was to determine the effect of a center-based functional circuit exercise training intervention followed by a 10-week customized home-based program in improving mobility function in sedentary older adults with diabetes. Methods: Participants (n = 111; mean age 70.5 [7.1] y; mean body mass index 32.7 [5.9] kg/m2) were randomized to either a moderate-intensity functional circuit training (FCT) plus 10-week home program to optimize physical activity (FCT-PA) primary intervention or one of 2 comparison groups (FCT plus health education [FCT-HE] or flexibility and toning plus health education [FT-HE]). Results: Compared with FT-HE, FCT-PA improvements in comfortable gait speed of 0.1 m/s (P < .05) and 6-minute walk of 80 ft were consistent with estimates of clinically meaningful change. At 20 weeks, controlling for 10-week outcomes, improvements were found between groups for comfortable gait speed (FCT-PA vs FT-HE and FCT-HE vs FT-HE) and 6-minute walk (FCT-PA vs FCT-HE). Conclusions: Functional exercise training can improve mobility in overweight/obese older adults with diabetes and related comorbidities. Future studies should evaluate intervention sustainability and adaptations for those with more severe mobility impairments.