Purpose: It is widely believed that physical restraint use causes mental and physical health decline in nursing home residents. Yet few studies exist showing an association between restraint initiation and health decline. In this research, we examined whether physical restraint initiation is associated with subsequent lower physical or mental health. Design and Methods: We used all nursing homes (N = 740) in Pennsylvania in 2001, with 12,820 residents. We used the Minimum Data Set data; Online Survey, Certification and Reporting data; and the Area Resource File as data sources. We restricted our sample to newly admitted nursing home residents who were not restrained in the first two quarters of their residency. We examined which facility and individual characteristics during those first two quarters were associated with restraint initiation during the third quarter. We then examined the association of third-quarter restraint initiation with fourth-quarter health outcomes, using regressions that controlled for first- and second-quarter health status as well as other resident, facility, and market characteristics. The physical health outcomes examined consisted of falls, walking dependence, activities of daily living (ADLs), pressure ulcers, and contractures. Mental health outcomes examined consisted of cognitive performance, depression, and behavior problems. Results: The initiation of restraint use was associated with a previous fall (p less than 0.01), psychoactive medication use (p less than 0.05), low cognition (p less than 0.01), ADL scores (p less than 0.01), and the absence of pressure ulcers (p less than 0.10), as well as a variety of facility characteristics. Subsequent to restraint initiation, we found an association with lower cognitive performance (p less than 0.01), lower ADL performance (p less than 0.01), and higher walking dependence (p less than 0.01). Implications: We found that an association between restraint initiation and subsequent adverse health consequences exists and is substantial. Moreover, these results would appear to have practical as well as statistical significance.