OBJECTIVE While activities of daily living are by definition preserved in mild cognitive impairment (MCI), there is evidence of poorer instrumental activities of daily living (IADL) functioning in MCI compared to normal ageing. The aims of the present study were to examine differences in IADL between individuals with MCI and cognitively normal elderly, and to examine the relationships of IADL with cognitive functions. METHODS The sample of 762 community-living participants aged 70-90 were assessed with a comprehensive neuropsychological test battery and with the informant-completed Bayer-Activities of Daily Living Scale (B-ADL). RESULTS Compared to cognitively normal individuals, the MCI group was rated as having more difficulties on the B-ADL and performed worse on cognitive tests. Factor analysis of the B-ADL items yielded two factors, which were labelled 'high cognitive demand' (HCD) and 'low cognitive demand' (LCD). Individuals with MCI scored worse than cognitively normal participants on the HCD factor but similarly on the LCD factor. Men were rated as having more difficulties on the HCD, but not the LCD, factor compared to women. The HCD factor score correlated significantly with all five cognitive domains measured, but the LCD factor correlated significantly only with attention/processing speed and to a lesser extent with executive function. CONCLUSIONS Having more difficulties in IADL, especially those with higher demand on cognitive capacities, was found to be associated with MCI and overall cognitive functioning. This has implications for the definition of MCI, as lack of functional impairment is generally used as a criterion for diagnosis.