Objectives To determine whether midlife occupational physical activity (PA) is associated with disability in older adults and to test disease as a mediating variable. Design Cross‐sectional study. Setting National Health and Aging Trends Study. Participants Individuals aged 65 and older (N = 7,307). Measurements Participants were classified as to occupational PA levels by linking information from the Occupational Information Network database using standard occupation codes. Disability outcomes and covariates were obtained through in‐person interviews. Logistic regression models were used to examine the association between occupational PA and disability. Structural equation modeling (SEM) was fitted to examine the mediating effect of disease. Results Occupations with high physically demands were associated with greater decline in functional capacity later in life. Individuals with occupations with high and very high PA were less likely to be able to perform activities of daily living than those with occupations with low PA. SEM showed that occupational PA has a very strong direct effect on disability (P < .001) and has an indirect effect on disability through disease (P = .003). The population attributable fraction for high occupational PA was 11%. Conclusion Higher midlife occupational PA levels were significantly associated with poorer ability to perform activities of daily living in older age. Performing the optimal level of occupational PA may be instrumental in reducing disability later in life.