One in five older adults in Taiwan have been diagnosed with diabetes. This study drew on disability data for 5121 nationally representative middle-aged and older adults from the 1996-2003 Survey of Health and Living Status of the Elderly in Taiwan (SHLSET). By employing cohort sequential design and multilevel models, it combined cross-sectional and longitudinal evidence to characterize the age trajectory of physical disability from midlife to older adulthood and to discern the extent to which diabetes contributes to the variation in that trajectory. The main effects of diabetes and diabetes x age interaction in the fully controlled model provide evidence that diabetes independently and consistently changes physical functioning over and above natural aging processes in Taiwanese adults. In addition, while adding diabetes in the age trajectory of physical disability explained 3.2% and 1.6% of the variance in levels of and linear changes in physical disability trajectory, respectively, further adding follow-up status, sociodemographic factors and comorbidities altogether explained 40.5% and 29.1% of the variance in levels of and linear changes in that trajectory. These results imply that preventing the incidence of diabetes-related comorbidities may reduce the deterioration in both levels of and rates of change in physical disability.