The purpose of this observational study, designed as a cross-sectional sample of 621 elderly residents in Viçosa, Minas Gerais state, Brazil was to evaluate the prevalence of inadequate functional ability and associated factors in Brazilian elderly. Interviews were conducted at study subjects’ houses using a questionnaire focused on socio demographic information and health conditions. Elderly who reported some difficulty in performing six or more activities, or total inability to carry out at least three activities identified on the scale developed by Katz et al. (1963) and Lawton and Brody (1969) were considered to have inadequate functional ability. Data analysis included frequency distribution, bivariate and multivariate Poisson regression. The prevalence of inadequate functional ability was of 16.2% (95% CI: 13–19%) in the sample analyzed. With aging, there was a significant trend of inadequate functional ability increasing in men (χ2 for trend = 8.481; p = 0.003) and women (χ2 trend = 13.667; p < 0.001). Factors positively associated with inadequate functional ability were age over 80 years, low monthly income, poor self-health perception, history of hospitalization in the last year, use of 5 or more medicines in the last 15 days; history of depression, history of osteoporosis, and negatively associated to physical activity. Factors associated with inadequate functional ability highlighted in this study demonstrate the importance of health programs in Brazil focused on adults and the elderly in preventing or delaying functional decline and promote healthy aging.