A randomised controlled trial was conducted to determine whether a 12-month program of group exercise had beneficial effects on physiological and cognitive functioning and mood in 187 older community-dwelling women. The exercisers (n = 94) and controls (n = 93) were well matched in terms of the test measures and a number of health and life-style assessments. The mean number of classes attended by the 71 exercise subjects who completed the program was 59.0 (range 26 to 82). At the end of the trial, the exercisers showed significant improvements in reaction time, strength, memory span and measures of wellbeing when compared with the controls. There was also an indication that anxiety had been reduced in the exercisers. Within the exercise group, improvements in memory span were associated with concomitant improvements in both reaction time and muscle strength. Also, within this group, initial mood measures were significantly inversely associated with improvements at retest, which suggests that the program may have normalised mood states in subjects who had high initial depression, anxiety and stress levels, rather than inducing improvements in all subjects. These findings suggest that group exercise has beneficial effects on physiological and cognitive functioning and wellbeing in older people.