The aim of this study was to perform an exploratory investigation of the individual characteristics of older adults that affect the relationships between physical function and neighborhood environment. A total of 624 community-dwelling older adults living independently, aged ≥65 years, participated in this cross-sectional study. Physical function was assessed by muscle strength (grip strength and knee extension strength) and physical performance (5-m walking time and Timed Up and Go Test). The neighborhood environment was assessed using the International Physical Activity Questionnaire Environmental Module. The individual characteristics that affect the association between both were analyzed using multiple regression analysis and Classification and Regression tree (CaRT) analysis. In both older men and women, multiple regression analysis showed that neighborhood environment was significantly associated with physical function. On the other hand, on CaRT analyses, older men ≤80 years of age without low back pain and depressive symptoms and perceived good access to recreational facilities had the shortest 5-m walking time. However, CaRT analyses found no relationship between physical function and neighborhood environment in older women. The relationships between physical function and neighborhood environment may be altered by sex, age, and physical and mental health conditions.