BACKGROUND: Given previous findings of adverse health outcomes associated with the E4 allele, data from a biracial community sample of older adults were used to determine whether functional decline is associated with the apolipoprotein E (APOE) E4 allele. METHODS: In 1986, a stratified random household sample of community residents 65 years of age and older (n = 4162) formed the Duke Established Populations for Epidemiologic Studies of the Elderly. Of those available 6 years later, 78.4% (n = 1999) were genotyped, providing "baseline" data at this time. The available survivors (n = 1529) provided longitudinal data 4 years later. Using longitudinal data from this sample, a combination of measures assessing self-care capability, instrumental activities of daily living (IADL), and mobility was obtained at baseline and 4 years later (n = 1529) to determine the extent to which the E4 allele affected change in functional status. Functional status was assessed using items from a modified Katz Activities of Daily Living (ADL) Scale, the Older American Resources and Services IADL scale, and the Rosow-Breslau physical health scale. Control measures included demographic characteristics, depression, health status, arthritis, and cognitive status. APOE was coded as E4 present versus absent. RESULTS: APOE E4 was not associated with decline in functional status in either bivariate or multivariate analyses as a main effect. There were, however, statistically significant interactions of the E4 allele with gender and baseline functional status, with greater functional decline in women with the E4 allele, whereas those with poorer baseline functioning who had the E4 allele were less likely to decline. No significant racial differences were found. CONCLUSIONS: Despite the documented association of the E4 allele of APOE with adverse health outcomes, the E4 allele was not associated with a decline in functional status as a main effect. Interactions of E4 with gender (being female) and baseline functional status, however, did predict functional decline.