Background: Osteoarthritis (OA) is a degenerative joint disease, which affects a large number of older adults. Many older adults with OA are physically inactive, which can contribute to reduced functional capability, quality of life, and an increased risk of falls. Although hydrotherapy is often recommended for older adults with OA, less is known about aqua fitness (AF), a widely available form of aqua-based exercise. Purpose: To compare the effect of an AF program and a seated aqua-based exercise program on a range of functional measures and quality of life among older adults with OA. Methods: Thirty-five older adults with OA were allocated to an AF group or an active control group who performed seated exercises in warm water for 12 weeks. The primary outcome measure was the timed up-and-go (TUG) test; other measures included step test, sit-to-stand (STS) test, handgrip strength test, 400-m walk test, Arthritis Impact Measurement Scale-Short Form (AIMS2-SF), and Falls Efficacy Scale-International (FES-I). Results: FES-I scores improved significantly in the AF group compared with the control group (P = 0.04). Within-group analysis indicated both groups significantly improved their 400-m walk time (P = 0.04) and that the AF group significantly improved its step test right (P = 0.02) and left (P = 0.00) and the AIMS2-SF total score (P = 0.02). No significant change in TUG, STS, or handgrip strength was observed for either group. Conclusions: Aqua fitness may offer a number of positive functional and psychosocial benefits for older adults with OA, such as a reduced fear of falling and increased ability to perform everyday tasks.