OBJECTIVE -To determine the role of peripheral nerve dysfunction (PND) in the disablement pathway.RESEARCH DESIGN AND METHODS -Vibration perception threshold (VPT) was measured in 894 women aged Ն65 years, and those with normal peripheral nerve function and with mild, moderate, and severe PND were identified. Lower-extremity impairments included quadriceps strength (kilograms) and three progressively difficult balance tasks (able/unable). Functional limitations included rising from a chair (able/unable) and usual pace and fast-paced walking speeds (meters/second). Level of PND was related to impairments and functional limitations in linear and logistic regression models that controlled for potentially confounding factors, including reported diabetes.RESULTS -Level of PND was associated with impaired balance (adjusted odds ratios: 2.21, 1.95, and 3.02 for mild, moderate, and severe PND, respectively, relative to normal, P Ͻ 0.05). PND was also associated with decrements in both usual and fast-paced walking speeds (Ϫ0.08, Ϫ0.08, and Ϫ0.15 m/s for usual pace and Ϫ0.13, Ϫ0.12, and Ϫ0.24 m/s for fast-paced walking speed for women with mild, moderate, and severe PND, respectively; P Ͻ 0.01 for all). Reported diabetes was not associated with these outcomes in the presence of PND. Some, but not all, of the association between PND and functional limitations was explained by the relationship between PND and impairments.CONCLUSIONS -PND is significantly associated with both lower-extremity impairments and functional limitations in older women, and PND appears to have independent effects on functional limitations. The independent effect of diabetes on these outcomes may be limited when PND is considered. Further research is needed to determine if PND is causally related to disability in old age.