Questions: What is the association between mobility and falls risk for people living in residential aged care? Can the Physical Mobility Scale discriminate between residents at risk of falling and those not at risk? Design: Prospective longitudinal observational study. Setting: Six residential aged care facilities in Australia. Participants: Eighty-seven high- and low-level care permanent residents. Outcome measures: The primary outcome measure was the number of falls in the six months after the initial mobility assessment. Mobility of all participants was assessed using the Physical Mobility Scale, which includes nine mobility items assessed on a 0-5 scale yielding a total score out of 45. Results: During the six-month study period, 131 falls were reported. Residents with mild mobility impairment (Physical Mobility Scale total score 28-36) had the highest fall risk (hazard ratio = 1.98, 95% CI 1.30 to 3.03). Residents with fully dependent mobility (Physical Mobility Scale total score 0-9) had the lowest risk for falls (HR. =. 0.05, 95% CI 0.01 to 0.32). Conclusion: Aged care residents with mild mobility impairment are at increased risk of falls and are an appropriate target for falls prevention strategies. Although improving the mobility of residents with moderate to severe mobility impairment may enhance their independence and reduce their burden on staff, paradoxically this may also increase their risk of falls. When these residents improve enough to progress into a higher category of mobility, physiotherapists should be aware that this may increase the risk of falls and should consider instituting appropriate falls prevention strategies.