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Purpose The incidence of treatment-related toxicity for adjuvant chemotherapy in breast cancer is well documented in clinical trials. However, the effect of chemotherapy on functional outcomes in older patients is less well known. We identified a cohort of older women diagnosed with early stage breast cancer to examine the association between exposure to chemotherapy and a claims-based measure of function-related adverse events (FAE). Methods Using the Surveillance, Epidemiology, and End Results (SEER)-Medicare dataset, we identified women aged ≥ 66 diagnosed with stage I or II breast cancer from 2004 to 2011. FAE were defined as one or more claims suggestive of functional impairment within 24 months following chemotherapy including claims for durable medical equipment and skilled care. Women who did not receive chemotherapy were weighted to reflect the covariate distribution of chemotherapy recipients using propensity score weighting for age, stage, baseline healthcare utilization, and comorbidities. Results The cohort included 44,626 patients, 6892 (15%) received chemotherapy. 19% of the population experienced ≥ 1 FAE. After propensity weighting, chemotherapy was associated with a small increased risk of FAEs (HR 1.12, 95% confidence interval: 1.04, 1.20). Results were similar in patients 75 years and older versus younger patients. In the chemotherapy group, the highest risk of FAE occurred in the first 3 months, but persisted through follow-up. Conclusions Exposure to chemotherapy was associated with a small increased risk of FAE which did not vary by age. These data can be used to inform treatment decision making for older patients with breast cancer who are eligible for adjuvant chemotherapy.