BACKGROUND Older women have higher percent body fat, poorer physical function, lower strength, and higher rates of nonfatal chronic conditions than men. We sought to determine whether these differences explained physical performance differences between men and women. METHODS Physical performance was assessed in the Health, Aging and Body Composition study in 2,863 men and women aged 70-79 with a composite 0-4 point score consisting of chair stands, standing balance including one-leg stand, and 6-m usual and narrow walk tests. Total body composition was measured by dual x-ray absorptiometry, thigh composition by computed tomography, and knee extensor strength by isokinetic dynamometer. Analysis of covariance estimated least square mean performance scores for men and women. RESULTS Men had higher performance scores than women (least square means: 2.33±0.02 vs 2.03±0.02, p < .0001), adjusted for race, study site, age, and height. Body composition measures (total body fat and thigh muscle area, muscle density, subcutaneous fat, and intermuscular fat) accounted for differences between men and women (least square means: 2.15±0.02 vs 2.17±0.02, p = .53). Higher strength in men partly explained the sex difference (least square means: 2.28±0.02 vs 2.12±0.02, p < .0001). Strength attenuated the association of thigh muscle mass with performance. Chronic health conditions did not explain the sex difference. CONCLUSIONS In a well-functioning cohort, poorer physical function in women compared with men can be explained predominantly by their higher fat mass, but also by other body composition differences. The higher proportion of body fat in women may put them at significant biomechanical disadvantage for greater disability in old age.