Objective: To examine the effectiveness of a 12-month community-based water exercise programme on measures of self-reported health and physical function in people aged over 60 years old with knee-hip osteoarthritis (OA). Design: A quasi-experimental design consisting of an exercise group and an age-matched control group. Setting: Public community swimming pool in Sheffield, UK. Subjects: One hundred and six community-dwelling sedentary older people, with confirmed knee-hip osteoarthritis, enrolled in an experimental controlled trial for 12 months. Sixty-six subjects in the exercise group were offered a water-exercise programme. Forty age-matched, nonexercising, 'control' subjects received monthly education material and quarterly telephone calls. Interventions: Participants in the exercise group were asked to attend two exercise sessions a week of 1 hour duration led by specially trained swimming instructors. Main measures: Primary outcome measure was the disease-specific Western Ontario and McMaster University Osteoarthritis Index (WOMAC). Secondary outcomes included a battery of performance-based physical function tests. Results: Adherence to exercise averaged 70% (±14%) over the year: 77% of the exercising subjects and 89% control subjects completed both pre- and post-outcome measures. After one year, participants in the exercise group experienced a significant improvement in physical function (4.0 ± 9.1 versus -0.4 ± 7.3 units; 95% confidence interval (CI) 0.96-7.96, p < 0.05) and reduction in the perception of pain (1.3 ± 3.7 versus 0.2 ± 2.5 units; 95% CI -0. 19-2.52, p < 0.05) compared with the control group, as measured by the WOMAC Osteoarthritis Index. In addition, the exercise group performed significantly better in the ascending and descending stairs tests (p < 0.05), had significantly greater improvements in knee range of movement (p < 0.01) and hip range of movements (p < 0.005). There were no significant differences in the two groups for quadriceps muscle strength and psychosocial well-being (Arthritis Impact Measurement Scales 2 questionnaire). Conclusions: Older people with knee/hip osteoarthritis gained modest improvements in measures of physical function, pain, general mobility and flexibility after participating in 12 months of community-based water exercise.