Many communities around the world, particularly developing countries including Indonesia, are experiencing population ageing. There is little knowledge regarding the impact of malnutrition, or its prevalence within rural compared to urban areas, on the nutritional, functional and mental status of community-living older residents in these countries. Hence, a cross-sectional study was conducted to determine socio-demographic and anthropometric characteristics, nutritional, mental and functional status, and energy and nutrient intake of community-dwelling Indonesians from both rural and urban areas of Yogyakarta. Older individuals were included in the study if they had been living in Yogyakarta for the last year and were aged >65 years (n = 527; mean ± SD age of 74 ± 7 years). Rural compared with urban participants had a lower level of education and income, more hospital admissions, less dietary protein intake, lower cognitive function, poorer nutritional status and grip strength, but faster gait speed while being more dependent on assistance to perform daily activities (all p < 0.05). Cognitive function was more strongly associated than nutritional status with physical function. Rural older Indonesians living in Yogyakarta were more likely than urban older people to be malnourished and cognitively impaired, and to have associated reductions in functional capacity and independence. Strategies to improve cognitive function and nutritional status are therefore important for the wellbeing of Indonesian citizens.