This study examined cross-sectional relationships and longitudinal changes in psychological well-being and selected physical conditions in urban and rural older adults. A 2-year longitudinal analysis was conducted as part of the Tokyo Metropolitan Institute of Gerontology—Longitudinal Interdisciplinary Study on Aging in 1993 and 1995 in the urban area and in 1994 and 1996 in the rural area. The participants were 285 men and 341 women in the urban area and 301 men and 427 women in the rural area. Visual capacity and chewing ability were independent predictors of psychological well-being in urban elderly in the 1st survey and in the rural elderly in both surveys, and hearing capacity and movement capability were independent predictors of psychological well-being in urban elderly in the 2nd survey. Decrease in chewing ability was associated with decrease in psychological well-being in urban seniors; deterioration in visual capacity and movement capability was associated with decline in psychological well-being in the rural elderly.