Adequate levels of physical function (PF) are essential for vulnerable older adults to perform their daily tasks safely and remain autonomous. Our objective was to explore the mediating role of PF in the relationship between physical activity (PA) and gait speed (GS) in a large sample of older adults from the north of Brazil. This is a cross-sectional study that analyzed 697 older adults (mean age 70.35 ± 6.86 years) who participated in the project “Health, Lifestyle, and Physical Fitness in Older Adults in Amazonas” (SEVAAI). PA was assessed using the Baecke Questionnaire, PF using the Senior Fitness Test, and GS using the 50-foot Walk Test. Mediation pathways were analyzed to test the possible mediating role of PF between specific PA domains (PA-total score, PA-housework, PA-sport, PA-leisure) and GS. Regarding PA-total, the analysis showed that high-performance GS was partially mediated in approximately 19% by better PF performance. Moreover, the PF could partially mediate the association between PA-sport and PA-leisure with GS, at levels of approximately 9% and 46%, respectively. An inverse relationship was observed between PA-housework (sedentary lifestyle) and GS. This association was partially mediated to an extent of approximately 9% by better PF performance. We conclude that PF plays a crucial role in mediating the association between PA and GS among vulnerable older adults.