BACKGROUND: Depression is associated with significant functional impairment. Recent evidence has linked the orbital frontal cortex (OFC) with depression. We examined the relationship between OFC volumes in older subjects and impairment in the basic (BADL) and instrumental (IADL) activities of daily living. METHODS: The sample consisted of 81 subjects aged 60 years or older; 41 were depressed subjects and 40 healthy control subjects. In a structured interview, subjects reported their medical history and ability to perform both BADL and IADL. Subjects then had a brain magnetic resonance imaging (MRI) scan; the OFC was manually traced bilaterally using neuroanatomical landmarks. Logistic regression was used to examine the effect of OFC volume on BADL and IADL while controlling for the effects of total brain volume, subject status, medical comorbidity, and demographic factors. RESULTS: Smaller OFC volumes, along with greater cognitive impairment as measured by the Mini-Mental State Examination, were significantly associated with BADL impairment. Smaller OFC volumes and being depressed were significantly associated with IADL impairment. CONCLUSIONS: Smaller OFC volumes are independently associated with functional impairment, supporting its role in depression. Further studies are needed to determine how smaller OFC volumes are related to other MRI abnormalities associated with depression and functional impairment.