The effect of anxiety on impairment in activities of daily living was examined among elderly individuals residing in a long-term care setting. Eighty one subjects received complete assessments of psychiatric symptoms, cognitive impairment, and ability to perform daily living tasks. A multivariate analysis was conducted to determine the relative influence of anxiety, cognitive status, and depressive symptoms on daily living skills. The presence of anxiety was significantly associated with reduced functional status in performing activities of daily living. This relationship remained significant even after controlling for the presence of concurrent depressive symptoms as well as cognitive impairment. Anxiety is a significant source of morbidity among elderly individuals and substantially impairs social function over and above the effects of depression and cognitive decline. Current interventions for anxiety such as benzodiazepines may have adverse cognitive effects, hence more specific intervention strategies for anxiety may be very important for this population.