This systematic review examined the physical and cognitive effects of physically based interactive computer games (ICGs) in older adults. Literature searching was carried out from January 2000 to June 2011. Eligible studies were trials involving older adults (>65 years) describing the effects of ICGs with a physical component (aerobic, strength, balance, flexibility) on physical or cognitive outcomes. Secondary outcomes included adverse effects, compliance, and enjoyment. Twelve trials met the inclusion criteria. ICG interventions varied in terms of software, game type, and nature of the computer interaction. Although there was preliminary evidence that ICG is a safe and effective exercise intervention for older adults, the dearth of high-quality evidence limits this finding. No major adverse effects were reported and two studies reported minor events. ICG could be improved further by tailoring interventions for older adults; in particular, they should aim to optimize participant safety, motivation, and enjoyment for this population.