Abstract Background In Canada, one in three adults or almost 9 million people report having a chronic condition. Over two thirds of total deaths result from cardiovascular disease, diabetes, cancer and respiratory illness and 77% of persons ≥65 years have at least one chronic condition. Persons with chronic disease are at risk for functional decline; as a result, there is an increased awareness of the significance of functional status as an important health outcome. The purpose of this study was to determine whether patients who receive a multi-component rehabilitation intervention, including online monitoring of function with feedback and self-management workshops, showed less functional decline than case matched controls who did not receive this intervention. In addition, we wanted to determine whether capacity building initiatives within the Family Health Team promote a collaborative approach to Chronic Disease Management. Methods A population-based multi-component rehabilitation intervention delivered to persons with chronic illnesses (≥ 44 yrs) (n = 60) was compared to a group of age and sex matched controls (n = 60) with chronic illnesses receiving usual care within a primary healthcare setting. The population-based intervention consisted of four main components: (1) function-based individual assessment and action planning, (2) rehabilitation self-management workshops, (3) on-line self-assessment of function and (4) organizational capacity building. T-tests and chi-square tests were used for continuous and categorical variables respectively in baseline comparison between groups. Results Two MANOVA showed significant between group differences in patient reported physical functioning (Λ = 0.88, F = (2.86) = 5.97. p = 0.004) and for the physical performance measures collectively as the dependent variable (Λ = 0.80, F = (6.93) = 3.68. p = 0.0025). There were no within group differences for the capacity measures. Conclusion It is feasible to monitor physical functioning as a health outcome for persons with chronic illness in primary care. The timeline for this study was not sufficient to show an increase in the capacity within the team; however there were some differences in patient outcomes. The short timeline was likely not sufficient to build the capacity required to support this approach. Trial registration NCT00859638