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A prospective study was done to investigate functional outcome, quality of life, and type of residence after hip fracture in patients 65 years of age and older. One hundred two patients admitted consecutively to a university and a general hospital were followed up as long as 4 months after admission. The mean age of the participants was 83 years; 58% of patients came from their own home, and 42% of patients came from institutions. Nearly 70% of patients had two or more diagnoses other than the hip fracture. Cumulative mortality was 20% at 4 months after fracture. Of surviving patients, 57% were back in their original situation for accommodation, 43% reached the same level of walking ability, and 17% achieved the same level of activities of daily living as before fracture. Patients experienced on average three complications, 26% of which were severe. Quality of life improved in the followup period of 4 months; however, the quality of life at 4 months was worse than the quality of life reported in a reference population. Average costs amounted to ε (Euro) 15.338 (which at the time was nearly equivalent to the US dollar) per patient, with nearly 50% of the costs attributable to hospital costs and 30% attributable to nursing home costs. The results of this study show a poor outcome after hip fracture in elderly patients.