This study examined the role of falls self-efficacy as a potential mediator of the exercise and fear-of-falling relationship. The study sample involved 256 community-dwelling older adults aged 70-92 years (M = 77.48, SD = 4.95) who were recruited from a local health care system in Portland, Oregon, and participated in either a Tai Chi (n = 125) or a stretching control (n = 131) exercise intervention, three times per week, for 6 consecutive months. Measures of falls self-efficacy and fear of falling were assessed at baseline and at 3-month and 6-month follow-ups. Intention-to-treat analyses were conducted to evaluate the hypothesis of falls self-efficacy as a mediator of change in fear of falling that resulted from the 6-month Tai Chi intervention. Results supported the mediational hypothesis in that Tai Chi participants, who evidenced improvement in falls self-efficacy over the course of the intervention, reported greater reductions in fear of falling, compared with those in the stretching control condition. Results suggest that exercise interventions designed to improve falls self-efficacy are likely to reduce fear of falling in older adults.