The San Luis Valley Health and Aging Study, was designed to examine Hispanic versus non-Hispanic White differences in prevalence and incidence of aging-related outcomes in a rural population (1,358 community dwellers and 75 nursing home residents). Data presented here were gathered between 1993 and 1997. Previously reported analyses identified greater prevalence of functional dependence in daily living activities among Hispanic elderly, especially females, than among non-Hispanic White elderly. This analysis explored the degree to which incident changes explain these patterns. Comparisons of incidence, recovery, and mortality rates after 22 months revealed no significant ethnic differences, although trends were as hypothesized: greater Hispanic incidence, lower Hispanic recovery rates, and less Hispanic mortality. Overall age-adjusted incidence (activities of daily living = 9.5; instrumental activities of daily living = 15.1 per 100 person-years) exceeded reports from most other studies, while rates of recovery (activities of daily living = 14.5; instrumental activities of daily living = 9.9) and mortality (4.8 among community dwellers; 6.7 including nursing home residents) were similar to those of other reports. Patterns of new dependence, recovery, and mortality did not increase the previously observed disparity. Greater prevalent disability in the Hispanic cohort, especially in women, may reflect a reservoir accumulated during younger years and related to culture and socioeconomic status as well as to older age.