1. A 1 year prospective study was undertaken to identify possible mediating physiological mechanisms for the association between psychoactive medication use and falls in 414 women aged 65 to 99 years (mean age 73.7 years, s.d. = 6.3) who were randomly selected from the community. 2. Women taking certain psychoactive medications showed impaired performance in a number of sensori-motor measures, including tactile sensitivity, lower limb muscle strength, reaction time and balance control compared with women not taking these medications. Those using psychoactive medications were also comparatively inactive--taking part in only 1.1 h of planned exercise per week compared with 2.6 h for non-users (F = 12.44, df = 1,412, P < 0.01). 3. Multiple logistic regression analysis revealed that use of long-acting benzodiazepines (OR = 7.03, 95% CI = 2.12-23.28) and antidepressants (OR = 2.84, 95% CI = 1.00-8.02) was significantly associated with multiple falls, whilst adjusting for age, other drug category use, frequency of alcohol use, and number of medical conditions. Use of any two psychoactive medications was also significantly associated with falling frequency (Chi-square = 13.91, df = 1, P < 0.01). 4. Path analysis revealed a significant direct association (P < 0.001) between psychoactive medication use and falls, and a significant indirect association mediated via reduced physiological functioning (P < 0.001). Postural hypotension was not significantly associated with falls (RR = 1.37, 95% CI = 0.84-2.22). 5. The findings suggest that psychoactive medication use may predispose older people to falling by impairing important sensori-motor systems that contribute to postural stability.