Background <p>Intrinsic capacity (IC) is a comprehensive index composed of cognition, locomotion, vitality, and sensory and psychological domains. This study explores the use of IC as a predictor of fall incidence and functional decline over 5 years.</p> Methods <p>Data were obtained from 2476 participants aged 60 years and older from Wave 3 (2015) and Wave 5 (2020) of the China Health and Retirement Longitudinal Study. IC was assessed via the WHO’s Integrated Care for Older People tool. Functional decline was defined as the inability to perform activities of daily living (ADLs) and instrumental activities of daily living (IADLs) independently. Falls were self-reported at follow-up. Multivariable logistic regression models were used to explore the association between IC and adverse outcomes.</p> Results <p>A total of 2476 participants were included in this study, including 1382 males (55.82%) and 1094 females (44.18%), with a mean age of 67.1 ± 5.6 years. The mean total IC score was 4.25 ± 1.78. More depressive symptoms were associated with increased fall risk (OR = 1.410; 95% CI: 1.138–1.747) and decreased ability to perform IADLs (OR = 1.772; 95% CI: 1.451–2.163). Visual impairment was associated with increased fall risk (OR = 1.371; 95% CI: 1.110–1.693) and decreased ability to perform ADLs (OR = 1.281; 95% CI: 1.050–1.563). Poor chair rise test results (OR = 1.351; 95% CI: 1.006–1.814) and hearing impairment (OR = 1.283; 95% CI: 1.020–1.614) were associated with decreased ability to perform IADLs. Furthermore, greater IC was associated with decreased risks of falls and functional decline.</p> Conclusions <p>The total IC score and components of each domain were associated with the risk of falls and functional decline after 5 years.</p>