Objective: To examine the relationship of postural sway to sensorimotor impairment, functional performance, and self-reported disability. Design: Cross-sectional cohort Setting: Department of Veterans' Affairs Medical Center. Patients: One hundred community-dwelling elderly unable to climb stairs step over step. Main Outcome Measures: Postural sway (area of ellipse and path length, eyes open and closed), sensorimotor (strength, sensation, range of motion, central processing time), functional performance (functional reach, timed gait, mobility skills, endurance), and disability (MOS-SF36, Falls Efficacy Scale [FES]). Results: Postural sway area measures correlated with sensorimotor measures: (1) During eyes-closed conditions, increased sway occurs in individuals with sensory deficits (p < .05); (2) Sway was positively correlated with tibialis anterior latency (p < .05); (3) Sway area measures increased with increased strength (p < .05). The sway/strength relationship may be explained by weak subjects improving their stability by limiting rather than increasing sway. Sway was not significantly correlated with any measures of physical performance. Sway was correlated with some measures of disability: (1) Eyes-closed measures of postural sway were correlated with FES scores (p < .05); (2) Sway was not correlated with the MOS-36 physical functioning question. When controlling for functional measures, eyes-closed measures of sway significantly predicted FES scores (p < .03). Conclusions: Measures of postural sway are more likely capturing sensorimotor deficits rather than differentiating functional performance abilities, and the relationship between postural sway and self-reported disability is inconsistent.