Our understanding of the mechanisms through which racial/ethnic disparities in disability in older adults develop and are maintained is limited. We examined the role of physical impairment, socioeconomic factors and health for racial/ethnic disparities in activities of daily living (ADL), and the modifying role of the indoor home environment. Data come from the National Health and Aging Trends Study (N = 5,640), and negative binomial regression models were specified separately for men and women. Blacks and Hispanics reported more ADL difficulty than Whites. Living in homes with clutter was associated with higher rates of ADL difficulty, but it was not related to racial/ethnic disparities. Racial/ethnic differences were explained by physical impairment for men, but not for women. Socioeconomic factors and health accounted for remaining disparities for Black, but not for Hispanic women. Attention to individual and environmental factors is necessary to fully understand and address race/ethnic disparities in disability in older Americans.