Physical function is an important measure of success of many medical and surgical interventions. Ability to adjust for comorbid disease is essential in health services research and epidemiologic studies. Current indices have primarily been developed with mortality as the outcome, and are not sensitive enough when the outcome is physical function. The objective of this study was to develop a self-administered Functional Comorbidity Index with physical function as the outcome. The index was developed using two databases: a cross-sectional, simple random sample of 9,423 Canadian adults and a sample of 28,349 US adults seeking treatment for spine ailments. The primary outcome measure was the SF-36 physical function (PF) subscale. The Functional Comorbidity Index, an 18-item list of diagnoses, showed stronger association with physical function (model R(2) = 0.29) compared with the Charlson (model R(2) = 0.18), and Kaplan-Feinstein (model R(2) = 0.07) indices. The Functional Comorbidity Index correctly classified patients into high and low function, in 77% of cases. This new index contains diagnoses such as arthritis not found on indices used to predict mortality, and the FCI explained more variance in PF scores compared to indices designed to predict mortality.