Fifty-five predominantly sedentary older people (age range 65-87) were recruited to take part in a ten-week community-based exercise programme designed to improve physical function. Primary outcome measures were endurance walking, natural walking speed, chair rise time, standing balance, grip strength, back flexibility and shoulder flexibility. The effects of the exercise programme on self-perceived health status were also assessed using repeated applications of the Short Form-36 questionnaire. Fifty-five control subjects matched on sex, age and physical activity were also sent SF-36 questionnaires but did not take part in functional testing or group exercise activity. At the end of the ten-week programme, all physical function measures except shoulder flexibility were significantly improved (p < 0.05). Effect sizes ranged from 0.25 to 0.82. All eight dimensions of the SF-36 health status instrument were unchanged in the control group and significantly improved in the exercise group. Effect sizes ranged from 0.26 to 0.93. This study demonstrates the efficacy of regular group exercise for improving physical functions and perceived health status in older people.