This study examined the types of physical activity (PA) retirement community residents report and the effects of PA and depressive symptoms on functional limitations. Elders (N = 38) enrolled in a 2-year sensor technology study in senior housing completed regular assessments of functional limitations and depressive symptoms with the Short Physical Performance Battery and Geriatric Depression Scale, respectively. Evaluation of reported PA using the Physical Activity Scale for the Elderly coincided with 12-month functional limitation testing. Subjects were 69% female with mean age of 85 years. Individuals reporting greater PA had significantly fewer functional limitations at 12 months. In multiple regression analysis, baseline functional limitations explained 66% of the variance in 12-month functional limitations, while current PA explained an additional 5%. Although PA explained a small amount of variance in 12-month functional limitations, as a modifiable behavior, PA should be championed and supported to help ameliorate functional limitations in older adults.