A paucity of information exists to characterize the relationship between the health status of elderly people and their physical environment. The Canadian Study of Health and Aging (CSHA) is a multicenter study of the distribution of dementia among community-dwelling and institutionalized Canadians aged 65 years and older. The study also provides the opportunity to examine issues such as the physical environment which may be related to the health of elderly people. Six items were used to assess the cleanliness, neatness, and maintenance of the inside and outside of the homes of 8,134 community-dwelling individuals. Data were also obtained to evaluate cognition, physical health, and functional capacity. Five years after the original survey, information pertaining to subsequent institutionalization and/or mortality was obtained. A significant relationship was found between classification of physical environment and the outcomes of institutionalization and mortality. The likelihood of both adverse outcomes was notably higher for individuals living in a “less than ideally maintained environment” compared to an “ideally maintained environment.” Limitations of the six items used to assess the physical environment and ways in which to improve the sensitivity of the items, consequently avoiding measurement bias, are discussed.