Particularly in older adults, self-reports of physical health need not necessarily reflect their objective health status as they can be biased by optimism. In this study, we examine whether the effect of objective physical functioning on subjective physical functioning is modified by health-specific optimism and self-efficacy. A longitudinal study with three measurement points over 6 months and 309 older adults (aged 65-85) with multimorbidity was conducted. Subjective physical functioning was regressed on objective physical functioning, health-specific optimism and self-efficacy. Subjective physical functioning was predicted by both objective physical functioning and optimism as a mediator. Moreover, an interaction between optimism and self-efficacy was found: Optimism predicted subjective physical functioning only for individuals with low self-efficacy. Subjective physical functioning is as much based on objective physical functioning as it is on health-specific optimism. Older adults base their subjective physical functioning on objective indicators but also on optimism, when they are less self-efficacious.