BACKGROUND/OBJECTIVES: Tooth loss is associated with reduced functional capacity, but so far, there is no relevant causal evidence reported. We investigated the causal effect of tooth loss on the instrumental activities of daily living (IADL) among older adults in England. DESIGN: Natural experiment study with instrumental variable analysis. SETTING: The English Longitudinal Study of Aging (ELSA) combined with the participants' childhood exposure to water fluoride due to the community water fluoridation. PARTICIPANTS: Five thousand six hundred and thirty one adults in England born in 1945-1965 participated in the ELSA wave seven survey (conducted in 2014-2015; average age: 61.0 years, 44.6% men). MEASUREMENTS: The number of natural teeth predicted by the exogenous geographical and historical variation in exposure to water fluoride from age 5 to 20 years old (instrumental variable) was used as an exposure variable. The outcome, having any limitations in IADL (preparing a hot meal, shopping for groceries, making telephone calls, taking medications, doing work around the house or garden, or managing money), was assessed by self-reported questionnaires.RESULTS: Linear probability model with Two-Stage Least Squares estimation was fitted. Being exposed to fluoridated water was associated with having more natural teeth in later life (coefficient: 0.726; 95% confidence interval (CI) = 0.311, 1.142; F = 11.749). Retaining one more natural tooth reduced the probability of having a limitation in IADL by 3.1 percentage points (coefficient: −0.031; 95% CI = −0.060, −0.002). CONCLUSION: Preventing tooth loss maintains functional capacity among older adults in England. Given the high prevalence of tooth loss, this effect is considerable. Further research on the mechanism of the observed causal relationship is needed.