Background: a fall occurs when an individual experiences a loss of balance from which they are unable to recover. Assessment of balance recovery ability in older adults may therefore help to identify individuals at risk of falls. The purpose of this 12-month prospective study was to assess whether the ability to recover from a forward loss of balance with a single step across a range of lean magnitudes was predictive of falls. Methods: two hundred and one community-dwelling older adults, aged 65–90 years, underwent baseline testing of sensori-motor function and balance recovery ability followed by 12-month prospective falls evaluation. Balance recovery ability was defined by whether participants required either single or multiple steps to recover from forward loss of balance from three lean magnitudes, as well as the maximum lean magnitude participants could recover from with a single step. Results: forty-four (22%) participants experienced one or more falls during the follow-up period. Maximal recoverable lean magnitude and use of multiple steps to recover at the 15% body weight (BW) and 25%BW lean magnitudes significantly predicted a future fall (odds ratios 1.08–1.26). The Physiological Profile Assessment, an established tool that assesses variety of sensori-motor aspects of falls risk, was also predictive of falls (Odds ratios 1.22 and 1.27, respectively), whereas age, sex, postural sway and timed up and go were not predictive. Conclusion: reactive stepping behaviour in response to forward loss of balance and physiological profile assessment are independent predictors of a future fall in community-dwelling older adults. Exercise interventions designed to improve reactive stepping behaviour may protect against future falls.