Abstract-Falling is associated with psychosocial sequelae that may influence functional performance and fall risk. Exercise can improve psychosocial factors. To address the research questions (1) Do psychosocial variables differ among persons with and without falls? and (2) Among persons who fall, can exercise improve psychosocial variables? we evaluated psychosocial and functional performance variables in older persons with and without recent falls. A pretest and posttest design with a nonequivalent control group was used. Community-residing elderly individuals participated, 66 had falls in the past year (fallers) and 77 had no falls (nonfallers). Participants completed measures of self-esteem, depression, psychological impact, and functional performance at baseline and 6 weeks. Baseline descriptive characteristics for fallers and nonfallers were similar. Fallers then completed a 6-week exercise program. Exercise benefited fallers' self-esteem, depression, mobility, social role, social activity, and anxiety. Nearly 40% of fallers were clinically depressed before exercise and 24% were depressed after (p = 0.04). Psychosocial variables correlated significantly with quality of functional performance (p < 0.019). Among fallers, moderate exercise produced a significant improvement in psychosocial variables and functional performance (p < 0.045).