The purpose of this study was to assess the effects of a water-based exercise and self-management program on balance, fear of falling, and quality of life in community-dwelling women 65 years of age or older with a diagnosis of osteopenia or osteoporosis. Fifty women with an average age of 73.3 years (range 65.5-82.4, SD 3.9) were randomised to intervention or control groups. The intervention group received a 10-week water-based exercise and self-management program compiled by Community Physiotherapy Services and conducted by a physiotherapist at an aquatic centre twice a week for one hour. The control group did not receive any instructions and were not encouraged to change their physical activity, activities of daily living or social habits during the study. Change in balance, measured using the step test, from baseline to follow-up differed between intervention and control groups, with mean (95% CI) between-group differences of 1.7 (0.9 to 2.6) and 2.1 (1.1 to 3.1) steps on the left and right sides respectively. Between-group differences in score changes were also significant in four of the eight domains of quality of life measured using the Short Form 36 questionnaire (SF36; physical function 8.6 (0.4 to 16.8), vitality 12.0 (2.3 to 21.8), social function, and 14.1 (0.6 to 27.7) mental health 10.2 (2.0 to 18.4)), but not fear of falling measured using the modified falls efficacy scale (0.25 (-0.3 to 0.81). It is concluded that a water-based exercise and self-management program produced significant changes in balance and quality of life, but not fear of falling, in this group of community-dwelling women 65 years of age or older with a diagnosis of osteopenia or osteoporosis.