Aim We evaluated the impact of cognitive impairment and depression on functional impairment in people aged in their early 60s. Methods This cross‐sectional study included 3034 inhabitants of a rural area of Korea aged 60–64 years. The Korean version of the Mini‐Mental State Examination (MMSE‐K), the Geriatric Depression Scale (GDS‐15), and Lawton's Instrumental Activities of Daily Living (IADL) Scale were used to assess cognitive impairment, depression and functional impairment. Results A total of 30.8% of participants reported that they were dependent for at least one of the items on the IADL scale, and the overall prevalence of cognitive impairment and depression was 17.3% and 25.9%, respectively. The results showed that cognitive impairment had a stronger relationship with IADL impairment than did depression (odds ratio [OR] = 4.91, 95% confidence interval [CI] 3.91–6.17; c‐statistics = 0.647 and OR = 2.05, 95% CI 1.67–2.50; c‐statistics = 0.622, respectively). In particular, subclinical levels of the MMSE‐K and GDS‐15 score were associated with IADL impairment in participants without cognitive impairment or depression (OR = 0.73, 95% CI 0.67–0.80, OR = 1.09, 95% CI 1.03–1.16, per 1 point score increase, respectively). Only the MMSE‐K score showed a significant association in participants with either cognitive impairment or depression, or both. Our findings also showed the independent association of IADL impairment with age, employment status, education and type of insurance. Conclusions Compared with depression, cognitive impairment was more strongly associated with IADL impairment. Subclinical level of cognitive impairment and depression were also associated with IADL impairment in mentally healthy participants. Therefore, early intervention is required to prevent further decline. Geriatr Gerontol Int 2013; ●●: ●●–●●.