Background: The burden of chronic disease continues to rise as populations age. There is relatively little published on the socioeconomic distribution of this burden in older people. This study quantifies absolute and relative income-related inequalities in prevalence of chronic diseases, severe physical functioning limitation and high psychological distress in mid-age and older people in Australia. Methods. Cross-sectional study of 208,450 participants in the 45 and Up Study, a population-based cohort of men and women aged 45-106 years from New South Wales, Australia. Chronic conditions included self-reported heart disease, diabetes, Parkinson's disease, cancer and osteoarthritis; physical functioning limitation (severe/not) was measured using Medical Outcomes Study measures and psychological distress (high/not) using the Kessler Psychological Distress Scale. For each outcome, prevalence was estimated in relation to annual household income (6 categories). Prevalence differences (PDs) and ratios (PRs) were generated, comparing the lowest income category (<$20,000) to the highest (?$70,000), using Poisson regression with robust standard errors, weighted for age, sex and region of residence. Analyses were stratified by age group (45-64, 65-79 and ?80 years) and sex and adjusted for age and country of birth. Results: With few exceptions, there were income gradients in the prevalence of chronic conditions among all age-sex groups, with prevalence decreasing with increasing income. Of the chronic diseases, PDs were highest for diabetes (ranging between 5.69% and 10.36% across age-sex groups) and in women, also for osteoarthritis (5.72% to 8.14%); PRs were highest for osteoarthritis in men aged 45-64 years (4.01), otherwise they were highest for diabetes (1.78 to 3.43). Inequalities were very high for both physical functioning limitation and psychological distress, particularly among those aged 45-64 (PDs between 18.67% and 29.23% and PRs between 4.63 and 16.51). Absolute and relative inequalities tended to decrease with age, but remained relatively high for diabetes and physical functioning in the elderly (?80 years). Conclusions: Significant inequalities in the prevalence of chronic conditions, physical functioning and psychological distress persist into old age. The additional health burden placed on those who are already disadvantaged is likely to become an increasingly important issue in an ageing population.