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OBJECTIVES We examined longitudinal changes in cognitive and physical function and associations between change in function and falls in people with and without mild cognitive impairment (MCI). DESIGN Prospective cohort study with assessments every 2 years (for up to 6 years). SETTING Community, Sydney, Australia. PARTICIPANTS Four hundred and eighty one people were classified into three groups: those with MCI at baseline and MCI or dementia at follow-up assessments (n = 92); those who fluctuated between cognitively normal and MCI throughout follow-up (cognitively fluctuating) (n = 157), and those who were cognitively normal at baseline and all reassessments (n = 232). MEASUREMENTS Cognitive and physical function measured over 2-6 years follow-up. Falls in the year following participants' final assessment. RESULTS In summary, 27.4%, 38.5%, and 34.1% of participants completed 2, 4, and 6 years follow-up of cognitive and physical performance, respectively. The MCI and cognitive fluctuating groups demonstrated cognitive decline, whereas the cognitively normal group did not. The MCI group had worse physical function than the cognitively normal group at baseline but decline over time in physical performance was similar across all groups. Decline in global cognitive function and sensorimotor performance were associated with multiple falls in the cognitively normal group and decline in mobility (timed-up-and-go test) was associated with multiple falls across the whole sample. CONCLUSIONS Cognitive declines were not associated with falls in people with MCI and fluctuating cognition. Declines in physical function were similar between groups and decline in mobility was associated with falls in the whole sample. As exercise has multiple health benefits including maintaining physical function, it should be recommended for all older people. Programs aimed at mitigating cognitive decline should be encouraged in people with MCI.