Objective: The objective of this study was to develop and assess a composite measure of physical capacity using self-report and physical performance items. Method: Item response theory (IRT) is used to evaluate measurement properties of self-report and performance items and to develop a composite measure for 7,609 participants in the National Health and Aging Trends Study. Results: Self-reports distinguish differences at the lower end of physical capacity but not at mid-to-high levels. Performance-based measures discriminate across a fuller spectrum. An IRT-based composite score, drawing on both, provides increased measurement precision across the physical capacity spectrum and detects age group differences if either self-report or performance does so—suggesting it is better suited for studying age-related changes than either measure alone. Discussion: Self-report and performance measures have different strengths on the physical capacity spectrum. IRT provides a means of combining these different measurement approaches for analyses of physical capacity across a broad range of functioning in later life.