Physical activity and exercise contribute to the accumulation of cognitive reserve, which is instrumental for preserving cognitive health in old age. In a large sample of 701 older adults (mean age = 70.36 years), we investigated whether the relationship between having experienced a fall in the past and lower performance in cognitive functioning was mediated via less physical activity engagement as a cognitive reserve contributor. General cognition was assessed using the mini-mental state examination (MMSE), long-term memory using a word-pair delayed recall test and working memory using a backward digit-span test. In face-to-face interviews, individuals reported information on falls during the past 12 months and their habitual physical activity engagement. Our analyses demonstrated that the relationship between having experienced a fall in the past and lower performance in the cognitive functioning measures was partly mediated (by 16.3% for general cognition, 30.6% for long-term memory, and 33.1% for working memory, respectively) via less physical activity engagement. In conclusion, we suggest as a core bio-psychological mechanism that experiencing a fall at an older age is a critical life event that hinders sufficient physical activity engagement and thereby impedes cognitive reserve build-up, resulting in lower cognitive functioning outcomes.