OBJECTIVE: To evaluate whether adding functional exercise training to standard physiotherapy during residential slow-stream rehabilitation (SSR) improves discharge outcomes and functional ability. DESIGN: Randomized controlled trial. SETTING: A regional hospital. PARTICIPANTS: Older people (N=60) admitted to SSR. INTERVENTION: All participants received standard physiotherapy. An individualized functional incidental training (FIT) program was implemented for intervention participants consisting of 4 extra episodes of functional exercise daily for the period of SSR. Research assistants visited twice weekly to practice and progress FIT programs. MAIN OUTCOME MEASURES: Outcome measures included discharge destination, participant-expected discharge destination, and functional tests of the Berg Balance Scale (BBS), de Morton Mobility Index (DEMMI), and 5 times sit-to-stand test (FTSTS) at admission and discharge. RESULTS: Fifty-two participants completed the study. At baseline, the SSR group achieved higher scores on the BBS, DEMMI, and FTSTS. There was no significant difference in discharge destination between groups (P=.305). The difference in functional change between groups from admission to discharge on the BBS, DEMMI, and FTSTS was not significant. Participant-expected discharge destination was significantly associated with eventual discharge destination (χ1(2)=8.40, P=.004). CONCLUSIONS: Adding FIT to standard physiotherapy did not improve discharge outcomes and did not have a statistically significant effect on function, but may have a small effect on balance. Patient expected and actual discharge destinations were associated.