Objective Cognition predicts functional competence among individuals with schizophrenia across the lifespan. However, as these individuals age, increasing levels of medical burden may also contribute to functional deficits both directly and indirectly through cognition. Thus, we assessed the relationship among, cognition, medical burden, and functional competence in older individuals with schizophrenia. Methods We analyzed data obtained from 60 community-dwelling participants with schizophrenia and 30 control participants aged 50 or above. Cognition was assessed using the MATRICS Consensus Cognitive Battery (MCCB), functional competence was assessed using the USCD Performance-Based Skills Assessment (UPSA), and medical burden was assessed using the Cumulative Illness Rating Scale for Geriatrics (CIRS-G). Group differences were assessed using independent samples t-tests or chi-square tests. Mediation analyses using bootstrapping techniques were used to assess whether cognition mediated the effects of medical burden on functional competence. Results Participants with schizophrenia had higher levels of medical burden, cognitive deficits, and functional impairments. In participants with schizophrenia, cognition, but not medical burden, predicted functional competence after adjusting for age, education, gender, clinical symptoms, and anticholinergic burden of medications. In control participants, cognition and medical burden both predicted functional competence after adjusting for age, education, and gender. Further, cognition was found to fully mediate the association between medical burden and functional competence in control participants. Conclusion Cognition is a robust predictor of functional competence among older individuals with schizophrenia, regardless of medical burden. Cognitive deficits associated with schizophrenia may mask any further cognitive impairment associated with medical burden and its impact on function.