Background: Little is known about the wellbeing and mobility limitation of older disability retirees. Personal and environmental factors, such as time spent in working life, may either exacerbate or mitigate the onset of mobility limitation in general population. We aimed to study perceived midlife work ability as a determinant of self-reported mobility limitation in old age among municipal employees who transitioned into non-disability and disability retirement. Methods: 4329 participants of the Finnish Longitudinal Study of Municipal Employees (FLAME) had retired during January 1985 and July 2000. They had data on retirement, perceived work ability in 1985, and self-reported mobility limitation (non-disability retirement n = 2870, men 39 %; and diagnose-specific disability retirement n = 1459, men 48 %). Self-reported mobility was measured in 1985, 1992, 1997 and 2009. The latest score available was used to assess the number of mobility limitation. Work ability was measured by asking the respondents to evaluate their current work ability against their lifetime best in 1985. Incidence rate ratios (IRRs) and 95 % confidence intervals (CIs) for work ability predicting mobility limitation in non-disability and diagnose-specific disability retirement groups were calculated using Poisson regression models. Results: The prevalence of mobility limitation for those who transitioned into non-disability retirement (Incidence Rate, IR = 0.45, 95 % CI = 0.44–0.46) was lower compared to those who retired due to disability (IR = 0.65, CI = 0.63–0.66). A onepoint increase in the work ability score decreased the risk for having one more mobility limitation among non-disability and all diagnose-specific retirement groups (musculoskeletal disease, cardiovascular disease, mental disorder, and other diseases). Conclusions: Better midlife work ability may protect from old age mobility limitation among those who retire due to non-disability and disability. Promoting work ability in midlife may lead to more independent, active aging, regardless of type of retirement.