Physical limitations, depression and anxiety are prevalent among older adults. Mild to moderate exercise can promote physical and psychological health and reduce the risk of chronic diseases. Qigong, a type of Chinese traditional medicine exercise, has demonstrated beneficial effects on physical ability and mental health in adults with chronic conditions. The purpose of this review was to systematically assess the effects of Qigong exercise on physical and psychological health outcomes in older adults. A total of 1282 older adults aged 62 to 83 years with depressive symptoms, frailty or chronic medical illnesses were included in this review. The meta-analysis showed that Qigong exercise resulted in significantly improved physical ability compared with active control or usual care (standardized mean difference [SMD] = 1.00 and 1.20, respectively). The pooled effects of studies with thrice weekly Qigong sessions had the greatest effect (SMD=1.65) on physical ability in older adults. Lower quality studies demonstrated larger effect sizes than those of higher quality. Although Qigong exercise showed favorable effects on depression, balance and functioning, the overall effects did not reach statistical significance. No significant adverse events were reported. The findings suggest that the Qigong exercise may be an option for older adults to improve physical ability, functional ability, balance and to lessen depression and anxiety. However, the number of RCTs that enroll older adults is limited. More methodologically sound RCTs are needed to confirm the efficacy of Qigong exercise on physical and psychological health in older adults with chronic illnesses.