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Activity of daily living stages and instrumental activity of daily living stage have demonstrated associations with mortality and health service use among older adults. This cohort study aims to assess the associations of premorbid activity limitation stages with acute hospital discharge disposition among community-dwelling older adults.Study participants were Medicare beneficiaries aged 65 yrs or older who enrolled in the Medicare Current Beneficiary Survey between 2001 and 2009. Associations of premorbid stages with discharge dispositions were estimated with multinomial logistic regression models adjusted for covariates.The proportions of elderly Medicare patients discharged to home with self-care, home with services, postacute care facilities, and other dispositions were 59%, 15%, 19%, and 7%, respectively. The following adjusted relative risk ratios and 95% confidence intervals of postacute care facilities versus home with self-care discharge increased with higher premorbid activity limitation stages (except nonfitting stage III): 1.7 (1.5–2.0), 2.4 (2.0–2.9), 2.4 (1.9–3.0), and 2.5 (1.6–4.1) for activity of daily living stages I–IV; a similar pattern was found for instrumental activity of daily living stages. The adjusted relative risk ratios of discharge to home with services also increased with higher premorbid activity limitation stages compared with no limitation.Routinely assessed activity limitation stages predict posthospitalization discharge disposition among older adults and may be used to anticipate postacute care and services use by elderly Medicare beneficiaries.