This paper describes the development of the Assessment of Occupational Functioning (AOF), a screening tool designed to assess the functional capacity of residents in long-term treatment settings who have physical and/or psychiatric problems. The assessment is based on six variables of the Model of Human Occupation. A study of 83 community and institutionalized elderly subjects was conducted to examine the AOF’s dimensionality, test-retest reliability, interrater reliability, concurrent validity, and ability to discriminate between healthy and institutionalized adults. Item analysis suggests that ratings tend to correspond with components of the theoretical model. Both test-retest reliability and interrater reliability correlations for total test scores were above accepted minimum levels. Correlations of the screening tool with scores on the Life Satisfaction Index-Z, a concurrent validity measure, yielded positive correlations. Correlations of the screening tool score with another concurrent validity measure, the Geriatric Rating Scale score, yielded mixed results. Discrimination results indicated that the instrument can distinguish between the adaptive performance of normal and institutionalized populations.