This research examined the effects of changes in functional status on the risks for subsequent nursing home placement and death. Using data on the 3,646 baseline self-respondents to the Longitudinal Study on Aging who were successfully reinterviewed at the first follow-up (1986) and who were not in a nursing home at that time, a two-stage analysis was conducted. First, the risks for nursing home placement and death between the 1986 and 1988 follow-ups were modeled based on a static set of baseline (1984) indicators. Measures of the change in functional health status between baseline and first follow-up were then introduced to determine whether such change had significant net effects and enhanced model fit. Substantial improvement in model fit was obtained for both outcomes. The risk of nursing home placement was associated with deterioration in advanced (i.e., cognitive) ADLs and lower body function. Deterioration in basic ADLs and lower body function was associated with the risk of dying.