This study aimed to examine the effect of health-related service use on the development of functional disability in an older adult Taiwanese cohort. The sample population consisted of 871 participants without Instrumental Activities of Daily Living (IADL) disabilities, 1061 participants without Activities of Daily Living (ADL) disabilities and 817 participants without IADL and ADL disabilities at baseline. The onset of IADL and ADL disabilities were estimated as the follow-up survey year that these functional disabilities were first noted, or the follow-up survey year that the participant was noted as having died. A Cox proportional hazards model, with time-dependent covariates, was used to analyze the association between the time of onset of the functional disabilities and the health-related service use, after controlling for age, gender, education, marital status and time varying chronic disease status. This study found that an increase in the number of services used by the participants resulted in fewer IADL and ADL disabilities. Furthermore, participants who attended recreational programs, regular health examinations, and who received the information assistance and meal preparation were significantly less likely to develop disabilities. Participants who used one or more services were 55–77% less likely to be IADL disabled, and were 54–81% less likely to be ADL disabled, and were also 59–89% less likely to develop IADL and ADL disabilities as compared to those who used none. In the present study therefore, as the number of health services used increased the likelihood of developing a functional disability decreased.