This study examines the effect of intergenerational exchange on nursing home admissions among functionally disabled older adults in Taiwan. A group of 317 nursing home residents were randomly selected from all nursing homes in Taipei, the capital of Taiwan. In addition, two community groups were randomly selected as multiple controls in the study. The results showed that intergenerational exchange has a statistically significant effect on nursing home admission after controlling for sociodemographic characteristics and health status. The odds of being admitted into a nursing home was lower for those elderly who provided instrumental assistance to their families before they were disabled. The adjusted relative risk estimate was 0.2 (95% CI = 0.1 - 0.6). It shows that the instrumental assistance the elderly provided to the family before they became disabled was reciprocated when they needed ADL assistance. This finding provides strong support for the social exchange theory.