With the fast population aging, functional disability among the elderly is becoming a major public health issue. Depression is highly prevalent in this phase of life and may be associated with a significant proportion of the disability among elderly populations. We investigated the association of depressive symptoms and ICD-10 depression with functional disability in older adults and estimated the corresponding population attributable fractions (PAF). A cross-sectional one-phase population-based study was carried out with 2,072 individuals aged 65 years or over living in a low-income area of São Paulo, Brazil. Depressive symptoms and ICD-10 depression were assessed with the Geriatric Mental State and the Neuropsychiatric Inventory. We assessed functional disability with the WHO Disability Assessment Schedule Instrument. Prevalence Ratios and PAF were calculated using Poisson regression. The prevalence of depressive symptoms and ICD-10 depression was 21.4 and 4.8 %, respectively. Depression and depressive symptoms were strongly associated with high functional disability, even after adjustment for demographic factors, socioeconomic conditions, physical morbidities, and dementia. The PAFs for depressive symptoms and ICD-10 depression were 12.0 % for each of the psychiatric morbidity. Depressive symptoms contributed as much as ICD-10 depression to the population burden of functional disability in the elderly. Effective management of clinically significant depressive symptoms, delivered mainly at the primary care level, may reduce the total population disability.