Previous studies have shown that the physical functioning of older adults directly affects their depressive symptoms, and suicide is also closely associated with depression. This study determined the effects of physical functioning on depressive symptoms and suicidal ideation among older Korean adults. This study used data from the 2017 National Survey of Older Persons. Among the 10,299 participants in the entire data set, 10,083 participants were analyzed, excluding 216 participants who did not respond to the dependent variables. Data analyses included frequency, chi-squared tests, and binary logistic regression. The results indicated that physical functioning among older adults was associated with reduced depressive symptoms and suicidal ideation. Compared to the group that had non-limited activities of daily living (ADL) function, the group with limitations was 1.66 times more likely to show depressive symptoms (OR: 1.66, 95% CI: 1.36–2.02). Similar trends were observed in instrumental activities of daily living (IADL) (OR: 1.85, 95% CI: 1.58–2.16). When suicidal ideation was set as a dependent variable, IADL had a statistically significant impact (OR: 1.41, 95% CI: 1.14–1.74); however, ADL did not seem to have an impact. Moreover, both ADL (OR: 1.62, 95% CI: 1.35–1.94) and IADL (OR: 1.72, 95% CI: 1.49–1.97) had statistically significant effects when combined with depressive symptoms and suicidal ideation. Better physical functioning was associated with a reduction in depressive symptoms and suicidal ideation. This study emphasizes the importance of physical functioning when examining older adults’ mental health.