Objectives To determine the effect of a primary care-based care management initiative on residential care placement and death in a population of frail older adults referred for needs assessment in New Zealand. Design Randomized controlled trial with follow-up at 3, 6, 12, 18, and 24 months for residential care placement and mortality. Setting Fifty-five family physician practices in New Zealand that established a care management initiative for older adults assessed as being at high risk of residential care placement in 2004 to 2006. Participants Three hundred fifty-one individuals (243 female, 108 male) aged 65 and older (mean 81) who were assessed as being at risk of permanent residential care placement. Interventions The care management program (Coordinator of Services for Elderly) consisted of a nominated health professional care manager geographically aligned to family physicians housed with the family physician or located nearby. Measurements Rates of permanent residential care placement and mortality. Results The risk of permanent residential care placement or death was 0.36 for usual care (control group) and 0.26 for the care management initiative, a 10.2% absolute risk reduction, with the majority of the risk reduction seen in residential care placement (control group 0.25, intervention group 0.16). Conclusion A family physician-aligned community care management approach reduces frail older adults' risk of mortality and permanent residential care placement.