Diabetes is linked to functional decline, but the impact of prediabetes on physical function is unknown. We aimed to examine and compare the impact of prediabetes and diabetes on physical function and disability progression and to explore whether cardiovascular diseases (CVDs) mediate these associations.A cohort of 2,013 participants aged ≥60 from the Swedish National Study on Aging and Care in Kungsholmen, an ongoing population-based longitudinal study, was monitored for up to 12 years. Physical function was measured with chair stand (s) and walking speed (m/s) tests, and disability was measured by summing the numbers of impaired basic and instrumental activities of daily living. Diabetes was identified through medical examinations or clinical records, medication use, or glycated hemoglobin (HbA1c) ≥6.5%. Prediabetes was defined as HbA1c ≥5.7-6.4% in participants free of diabetes. CVDs were ascertained through clinical examinations and the National Patient Register. Data were analyzed using mixed effect models and mediation models.At baseline, 650 (32.3%) had prediabetes and 151 had diabetes (7.5%). In multiadjusted mixed-effect models, prediabetes was associated with an increased chair stand time (0.33, 95% CI 0.05-0.61), a decreased walking speed (-0.006, 95% CI -0.010 to -0.002), and an accelerated disability progression (0.05, 95% CI 0.01-0.08), even after controlling for the future development of diabetes. Diabetes led to faster functional decline than prediabetes. In mediation analyses, CVDs mediated 7.1%, 7.8%, and 20.9% of the associations between prediabetes and chair stand, walking speed, and disability progression, respectively.Prediabetes, in addition to diabetes, is associated with faster functional decline and disability, independent of the future development of diabetes. This association may be in part mediated by CVDs.