To estimate the prevalence of malnutrition in frail elders undergoing rehabilitation and the association between their nutritional status and physical function. Observational study of new participants undergoing ambulatory rehabilitation. Two Geriatric Day Hospitals (GDH) in Montreal, Quebec. 121 women and 61 men. Evaluation of nutritional status, body composition and physical function. The nutritional status was assessed with a composite index based on anthropometric measurements and serum albumin, as well as using the Mini Nutritional Assessment (MNA) questionnaire. Patients were classified as well-nourished, having mild/at risk of malnutrition or malnourished. Body composition was estimated by bioimpedance and handgrip strength and gait speed by standard methods. 13% of patients were found to be mildly malnourished, whereas 6% were malnourished. Malnourished patients were older and had worse cognition, lower BMI, and % body fat (all p<0.05). Malnourished patients and those with mild malnutrition had lower weight, triceps skinfold thickness, muscle and fat mass (all, p<0.003). Handgrip strength was different according to the nutritional status (p=0.034) and correlated with muscle mass (r=0.65, p<0.001). MNA classified 53% of patients as being at risk whereas 3% were malnourished and it correlated with gait speed (r=0.26, p=0.001). There is a high prevalence of patients in GDH at risk or with mild malnutrition. Being malnourished was associated with worse physical performance, which suggests that a nutritional intervention may be of benefit in improving their physical function.