The purpose of this study was to examine the relationship between empirical findings and a theoretical model of cognitive disturbance among 94 hospitalized and 78 institutionalized elders. Path analysis was used to determine the magnitude of relationships between variables described in the model. Neural function was the only variable in both groups that was significantly associated with greater cognitive disturbance. In the hospitalized group, neural structural changes and physiologic alterations contributed indirectly to cognitive disturbance by their effects on neural function. Further, neural function indirectly affected cognitive disturbance through its effects on sensory deficits. In the institutionalized group, environmental deficits and neural functions were significantly related to greater cognitive disturbance. Except for the direct effects of neural function on activity limitations and physiologic alterations on mental health, all the relationships between the variables described by the model were significantly different between hospitalized and institutionalized elders. The results suggest that different interventions to reduce cognitive disturbances may be required for institutionalized and hospitalized elders.