Measurement of Health-Related Quality of Life (HRQoL) of the elderly requires instruments with demonstrated sensitivity, reliability, and validity, particularly with the increasing proportion of older people entering the health care system. This article reports the psychometric properties of the 12-item Assessment of Quality of Life (AQoL) instrument in chronically ill community-dwelling elderly people with an 18-month follow-up. Comparator instruments included the SF-36 and the OARS. Construct validity of the AQoL was strong when examined via factor analysis and convergent and divergent validity against other scales. Receiver Operator Characteristic (ROC) curve analyses and relative efficiency estimates indicated the AQoL is sensitive, responsive, and had the strongest predicative validity for nursing home entry. It was also sensitive to economic prediction over the follow-up. Given these robust psychometric properties and the brevity of the scale, AQoL appears to be a suitable instrument for epidemiologic studies where HRQoL and utility data are required from elderly populations.