Due to the many problems associated with reduced balance and mobility, providing an effective and engaging rehabilitation regimen is essential to progress recovery from impairments and to help prevent further degradation of motor skills. The purpose was to examine effects of physical therapy based on the task-oriented approach delivered in an engaging, interactive video game paradigm. The intervention focused on performing targeted dynamic tasks, which included reactive balance controls and environmental interaction. Thirty community dwelling and ambulatory older adults attending the Day hospital for balance and mobility limitation treatment participated in this study. Participants were randomly assigned to either a control group or experimental group. The control group received the typical rehabilitation program provided at the Day Hospital, consisting of strengthening and balance exercises. The experimental group received a program of dynamic balance exercises coupled to video game play, using a centre of pressure (COP) position signal as the computer mouse. The tasks were performed while standing on a fixed floor surface with progression to a compliant sponge pad. Each group received 16 sessions, scheduled two per week, each lasting 45 minutes. Balance performance measures and spatial-temporal gait variables were obtained pre- and post-treatment Findings demonstrated significant improvements for both groups in balance performance scores post-treatment, and change scores were significantly greater in the experimental compared to control group. No significant treatment effect was observed in either group for the spatial-temporal gait variables. In conclusion dynamic balance exercises on fixed and compliant sponge surfaces were feasibly coupled to interactive game-based exercise. This in turn resulted in a greater improvement in dynamic standing balance control compared to the typical exercise program. However there was no transfer of effect to gait function.