Maintaining independence is the most important goal of the majority of older people. The onset of disability in activities of daily living is one of the greatest threats to the ability of older people to live independently. Older people with a low socioeconomic status (SES) are at high risk of functional decline. It is unclear what predicts functional decline in older people with a low SES. The aim of this study was to determine predictors of 12-month functional decline in community-living older people with low SES in the Netherlands. Functional decline was defined as the inability to perform (instrumental) activities of daily living. A prognostic multicentre study was conducted, using data from The Dutch Older Persons and Informal Caregivers Survey Minimum DataSet. A multivariable logistic regression model was fitted, using a stepwise backward selection process. Performance of the model was expressed by discrimination, calibration and accuracy. A total of 4.370 participants were included. The mean age of the participants was 80 years and 58.9% were female. Functional decline was present in 1486 participants (34.0%). Ten predictors were independently associated with the outcome. Dementia was the strongest predictor (OR 1.83, 95% CI 1.04–3.23). Other predictors were age, education, poor health, quality of life rate, arthrosis/arthritis, hearing problems, anxiety/panic disorder, pain and less social activities. The final model showed an acceptable discrimination (C-statistic 0.69, 95% CI 0.67–0.70), calibration (Hosmer-Lemeshow p-value 0.33) and accuracy (Brier score 0.20). Further research is needed to examine how functional decline can be ameliorated in this population.