Objectives. The study aimed to develop a set of clinical indicators to minimise the risk and adverse outcomes of functional decline in older hospitalised people. Methods. Existing Australian and international clinical indicators relevant to cognition and emotional health, mobility, vigour and self care, continence, nutrition, skin integrity, person-centred care, assessment and medication management were identified by literature and electronic website review. A multidisciplinary expert advisory group used modified Delphi methods, including two anonymous voting rounds and a group discussion, to gain consensus for a prioritised set of clinical indicators. For each indicator, experts voted on a scale of 1 (low level of prioritisation) to 9 (high level of prioritisation) based on measurement attributes and utility for use at the level of clinical teams, hospital managers and jurisdictional policy makers. Results. There were 55 existing clinical indicator sets identified, from which 63 relevant indicators were extracted. The final prioritised set covered all domains and included 19 indicators of which 17 were process indicators and 2 were outcome indicators. Scores for scientific measurement attributes and practicality for implementation were only moderate. Conclusion. These clinical indicators offer a consistent basis for monitoring hospital performance and improving care of older people in Victoria and other jurisdictions. What is known about the topic? Older hospitalised patients are at risk of functional decline and associated adverse outcomes such as falls and pressure ulcers. Clinical indicators to measure healthcare structures, processes and outcomes can be used to monitor quality of care among this vulnerable patient group. What does this paper add? This paper describes the process used to identify and select indicators for the Victorian government’s Council of Australian Governments Long Stay Older Persons initiative. It presents the use of a modified Delphi technique to gain group consensus for the indicator selection process; a technique being increasingly used in healthcare. What are the implications for practitioners? The indicators provide a set of measures that can be used by organisations, clinical teams and government level to assess the effect of quality improvement activities and initiatives aimed at minimising functional decline.