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Supplemental digital content is available in the text., Purpose Community-level group participation is a structural aspect of social capital that may have a contextual influence on individual health. We investigated the contextual effect of community-level prevalence of sports group participation on the risk of cognitive impairment among older individuals. Methods We analyzed prospective cohort data from the Japan Gerontological Evaluation Study, a nationwide survey of 40,308 functionally independent older individuals from 346 communities. Cognitive impairment was assessed by the nationally standardized dementia scale proposed by the Ministry of Health, Labour and Welfare of Japan. Participation in a sports group 1 d per month or more frequently was defined as “participation.” We applied a two-level multilevel survival analysis to calculate hazard ratios (HR) and 95% confidence intervals (CI). Results The cumulative incidence of cognitive impairment during the 6-yr follow-up period was 9.8%. The mean proportion of sports group participation was 25.2% (range, 0.0%–56.5%). Higher prevalence of community-level sports group participation was associated with a lower risk of cognitive impairment (HR, 0.92; 95% CI, 0.86–0.99, estimated by 10 percentage points of participation proportion) after adjusting for individual-level sports group participation, sex, age, disease, obesity, social isolation, alcohol, smoking, education, income, depression, daily walking time, population density, and sunlight hours. We found cross-level interaction between individual- and community-level sports group participation (HR, 0.87; 95% CI, 0.76–0.99). Conclusions We found a contextual preventive effect of community-level sports group participation on developing cognitive impairment among older individuals. Furthermore, the benefit may favor sports group participants. Therefore, promoting sports groups in a community setting may be effective as a population-based strategy for the prevention of dementia.