Purpose Community rehabilitation is an essential health service that is often not available to remote Australians. This paper describes the first cycle of a collaborative project, between local community members, allied health professionals and a university, to co-design a community rehabilitation and lifestyle service to support adults and older people to stay strong and age well in place. Methods An action research framework was used to develop the service for adults in two remote communities, one being a discrete Aboriginal community. The first cycle involved planning for, and trialling of a service, with observations, reflections and feedback from clients, community members, university students and health service providers, to inform the subsequent service. Results Over two years, stakeholders worked collaboratively to plan, trial, reflect and replan an allied health student-assisted community rehabilitation service. The trial identified the need for dedicated clinical and cultural supervision. During replanning, three key elements for culturally responsive care were embedded into the service: reciprocity and yarning; holistic community-wide service; and Aboriginal and Torres Strait Islander mentorship. Conclusions An action-research approach to co-design has led to the establishment of a unique community rehabilitation service to address disability and rehabilitation needs in two remote Australian communities. Implications for rehabilitation Co-design of community rehabilitation services between Aboriginal and Torres Strait Islander community members and the local allied health professionals can lead to development of an innovative service model for remote Aboriginal communities. Culturally responsive community rehabilitation services in Aboriginal and Torres Strait Islander communities requires holistic and community-wide perspectives of wellbeing. Incorporating Aboriginal and Torres Strait Islander ways of engaging and communicating, and leadership and mentorship for non-Indigenous allied health professionals and students are essential components for students-assisted culturally responsive services.