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This article addresses two basic questions. First, it examines whether incarceration has a lasting impact on health functioning. Second, because blacks are more likely than whites to be exposed to the negative effects of the penal system—including fractured social bonds, reduced labor market prospects, and high levels of infectious disease—it considers whether the penal system contributes to racial health disparities. Using the National Longitudinal Survey of Youth and both regression and propensity matching estimators, the article empirically demonstrates a significant relationship between incarceration and later health status. More specifically, incarceration exerts lasting effects on midlife health functioning. In addition, this analysis finds that, due primarily to disproportionate rates of incarceration, the penal system plays a role in perpetuating racial differences in midlife physical health functioning.