Purpose: To assess the association of mobility deterioration during community-acquired pneumonia (CAP) illness on length of stay (LOS), readmissions, and institutional costs. Methods: This longitudinal observational study included 347 individuals hospitalized with CAP. All were offered routine early mobilization with a physiotherapist within 24 hours of admission and then daily during hospital stay. The exposure of interest was mobility status at time of clinical stability when compared with the premorbid level. Modelling adjusted for factors such as age, residential status, premorbid mobility level, comorbidities, and pneumonia severity. Results: One hundred forty-one (41%) individuals met the definition of mobility deterioration during the acute illness. The mean (95% confidence interval [CI]) time from achievement of clinical stability to hospital discharge for the groups with and without mobility deterioration was 5.7 (4.2–7.2) and 2.3 (1.4–3.2) days, respectively, with associated higher hospitalization costs (arithmetic mean ratio [95% CI] 1.61 [1.24–2.10]) in the mobility deterioration group. There was no evidence of an association between mobility deterioration and 90-day readmission (odds ratio [95% CI]: 1.34 [0.81–2.24]). Conclusions: Mobility deterioration during acute pneumonia illness has a significant impact on hospital LOS and resource use even in a hospital system that has an early mobility program. Further research is needed to investigate these associations and alternative interventions. Trial registration: ClinicalTrials.gov, Identifier: NCT02835040.