To describe associations between tooth loss and changes in higher-level functional capacity. Prospective cohort study. Twenty-four Japanese municipalities between 2010 and 2013. Functionally independent community-dwelling persons aged 65 and older (N=62,333). Self-reported number of teeth was used as an exposure variable. The outcome was changes in higher-level functional capacity measured using the Tokyo Metropolitan Institute of Gerontology Index of Competence (TMIG-IC), which consists of three domains: instrumental activities of daily living, intellectual activity, and social roles. The TMIG-IC score ranges from 0 (lowest function) to 13 (highest function). All covariates were chosen from baseline demographic, socioeconomic, health behavior, and health variables based upon evidence from previous studies. Inverse-probability weighting (IPW) with propensity score and multiple linear regression, estimating nonstandardized coefficients (β) and 95% confidence intervals (CIs), were used. The baseline response rate was 65.2%, and the follow-up rate was 70.1%. During the follow-up period, participants' TMIG-IC score declined by an average of 0.247 points (standard deviation: 1.446). The results showed a significant dose-response association between tooth loss and decline in higher-level functional capacity in multiple linear regression models. IPW models estimated the increment in TMIG-IC score (β=0.170, 95% CI=0.114 to 0.227) if edentulous participants gained 20 or more natural teeth. Tooth loss is associated with future decline in higher-level functional capacity. IPW models suggest that treatment for tooth loss attenuates decline in higher-level functional capacity.