OBJECTIVES: To estimate disability-free life expectancy according to three functional levels. DESIGN: A 2-year prospective study of older residents in a rural Japanese community. The functional ability of each individual was determined with self-completed questionnaires at baseline (1994) and at follow-up (1996). SETTING AND PARTICIPANTS: All residents of Wakuya Town, Japan, who were aged 65 years or older at the start of the study in 1994 (n = 3590). MEASUREMENTS: Single-year increment-decrement life tables were constructed from mortality rates and incidence of disability rates. Independent life expectancies in three functional areas: basic activities of daily living (ADL), instrumental activities of daily living (IADL), and mobility, were estimated for each sex and each year of age. RESULTS: The incidence and prevalence of disability were similar in men and women. For both sexes, independent life in IADL was shorter than independent life in ADL and mobility. The development and progression of disability were different between sexes: men experienced disability at a younger age and at a faster rate than women. CONCLUSIONS: The slow progress of disability, with a longer duration in a disabled state among women, induces a heavy burden on health and welfare resources. Interventions to delay the onset of disability in women should reduce the economic burden to society as well as improve the quality of life. Prospective studies to look at the process of disablement, based on direct observation, are needed to confirm the gender differences.