OBJECTIVES: To investigate the relation between perceived neighbourhood environment, social contact and support, and self efficacy, on the health of older people. DESIGN: British cross sectional population survey of people aged 65 and over. PARTICIPANTS: 999 people aged 65 plus living at home in Britain. RESULTS: Regression modelling showed that high self efficacy had a strong independent association with better self rated health status and physical functioning. Indicators of perceived neighbourhood environment that showed strong associations with both good health and functioning were: perceptions of good quality facilities in the area (social/leisure, facilities for people aged 65+, rubbish collection, health services, transport, closeness to shops, somewhere nice to walk), and high levels of neighbourliness (knows/trusts people). Perceptions of problems in the area (noise, crime, air quality, rubbish/litter, traffic, graffiti) were also predictive of poorer health. Measures of social contact and support did not show any independent associations with health or functioning. CONCLUSIONS: The unique value of this paper is in the simultaneous analysis of associations between perceived neighbourhood, social contact and support, self efficacy, and health. The consistent strength of older people's perceptions of the quality of facilities in their neighbourhoods shows that responsive reinforcement of local infrastructures might have wider health benefits. Also of interest was the strength of self efficacy as a predictor of self rated health and physical functioning. The results have implications for both neighbourhood level interventions and self management programmes in chronic illness.