Longitudinal data from a cohort of older men and women, aged 70-79, were used to test the hypothesis that stronger self-efficacy beliefs would protect against onset of perceived functional disabilities over a 2.5-year follow-up, independent of underlying physical ability. Standard self-report scales were used to assess perceived functional disabilities, ranging from mild performance difficulties (measured by a 5-item scale based on items by Nagi) to more severe disabilities (measured by the 7-item Katz Activities of Daily Living Scale [ADL]). Performance-based measurements of strength, balance, and gait provide more objective assessments of physical abilities. Self-efficacy beliefs were measured in terms of beliefs relating to managing interpersonal relationships and beliefs relating to managing more instrumental daily activities. Gender-specific multiple regression models revealed that weaker instrumental self-efficacy beliefs predicted declines in reported functional status as measured by the Nagi performance scale among both men and women, independent of standard sociodemographic, health status, and health behaviors. Among men, instrumental efficacy beliefs were also negatively related to reports of onset of Katz ADL. Self-efficacy beliefs were unrelated to measured changes in actual physical performance abilities for both men and women. These findings suggest that self-efficacy beliefs have significant impacts on perceptions of functional disability, independent of actual underlying physical abilities. Through such influences on perceptions of disability, self-efficacy beliefs may importantly affect lifestyles and quality of life at older ages.