Despite their limitations, mental status tests and self/proxy reports of instrumental activities of daily living (IADL) are often used to predict functional competence. In contrast, the Assessment of Motor and Process Skills (AMPS) is a direct observational assessment of IADL competence. Sixty-four community-dwelling elderly (20 Alzheimer's disease [AD] patients and 44 nondemented) were assessed with the AMPS, the Mini-Mental State Examination (MMSE), and the Older Americans Resources and Services (OARS)-IADL. Performance on all three assessments was significantly lower for the AD sample. The MMSE did not correlate significantly with the AMPS motor ability measures but it correlated modestly with the AMPS process ability measures. The OARS-IADL correlated significantly with the AMPS motor ability measure for the nondemented sample alone. Although mental status and self/proxy assessments provide some insight into individuals' IADL competence, direct observation of IADL task performance provides additional information regarding the subtle process and motor skills changes that occur in progressive dementing conditions.