Objective: Persistent and consistently observed racial disparities in physical functioning likely stem from racial differences in social resources and environmental conditions. Method: We examined the association between race and reported difficulty performing instrumental activities of daily living (IADL) in 347 African American (45.5%) and Whites aged 50 or above in the Exploring Health Disparities in Integrated Communities–Southwest Baltimore, Maryland Study (EHDIC-SWB). Results: Contrary to previous studies, African Americans had lower rates of disability (women: 25.6% vs. 44.6%, p = .006; men: 15.7% vs. 32.9%; p = .017) than Whites. After adjusting for sociodemographics, health behaviors, and comorbidities, African American women (odds ratio [OR] = 0.32, 95% confidence interval [CI] = [0.14, 0.70]) and African American men (OR = 0.34, 95% CI = [0.13, 0.90]) retained their functional advantage compared with White women and men, respectively. Conclusion: These findings within an integrated, low-income urban sample support efforts to ameliorate health disparities by focusing on the social context in which people live.