To examine the association between diabetes and disability in older Australians and to identify factors that explain this association.We analysed data from a subsample of the Australian Diabetes, Obesity and Lifestyle study (AusDiab) cohort. Disability was measured using the Katz questionnaire in those aged 60years or over and was defined as some difficulty in any of the Katz activities of daily living (ADL) questions.Among 2373 study participants aged 60years or above who had a disability assessment at the third wave of follow-up (2011-12), 255 (11%) reported at least some disability. Participants with diabetes at baseline had higher odds of disability at 12years [odds ratio=2.41 (95% CI 1.60-3.64)] as compared to individuals with normal glucose tolerance; these patterns were similar for men and women. There was no association between baseline prediabetes and disability [OR=1.27 (95% CI 0.91-1.78)]. Baseline body mass index (BMI) and cardiometabolic factors (hypertension, prior cardiovascular disease, impaired glomerular filtration rate, triglycerides and high-density lipoproteins) were important in explaining the increased odds of disability. BMI and cardiometabolic factors together explained 65% of the diabetes-associated odds of disability at 12years.In older Australians, we showed that baseline diabetes more than doubled the odds of reporting disability at 12years, with BMI and cardiometabolic factors accounting for much of this relationship. These findings suggest that interventions targeting weight control, and prevention and treatment of cardiometabolic factors may prevent disability associated with diabetes and promote healthy aging.