Study objective: Emergency department observation units are cost-effective alternatives to hospital admission for selected patients. However, the use and effectiveness of these units in the elderly population is unclear. We sought to describe the use of an ED observation unit by elderly patients (≥65 years), to determine whether the ED observation unit is effective for them in terms of ED observation unit length of stay and hospital admission rates, and to compare efficacy and return visit rates between younger and older patients. Methods: This is a retrospective observational cohort study of consecutive adult patients sent to an ED observation unit from 1996 to 2000 at a high-volume tertiary care suburban teaching hospital. ED observation unit length of stay of less than 18 hours and admittance rates of less than 30% were used as indicators of efficacy. Diagnosis, length of stay, hospital admission rates, and 30-day return visit rates were compared between younger and older patients. Results: Twenty-two thousand five hundred and thirty adult patients were observed, with 37.2% older than 65 years of age. The most common diagnoses in elderly patients were chest pain (24.0%), dehydration (11.7%), syncope (6.5%), back pain (4.6%), and chronic obstructive pulmonary disease (3.8%). Length of stay in the ED observation unit was longer for the elderly than younger patients but still averaged less than 18 hours (15.8 hours [95% confidence interval (CI) 15.7 to 16.0] versus 14.4 hours [95% CI 14.3 to 14.5], respectively). Elderly patients were more likely to be admitted from the ED observation unit than younger patients (26.1% versus 18.5%); however, their overall admission rate remained less than 30%. Compared with younger patients, the odds ratios for inpatient admission of elderly patients was highest for back pain (2.10; 95% CI 1.62 to 2.73), pyelonephritis (1.78; 95% CI 1.16 to 2.71), and chest pain (1.65; 95% CI 1.44 to 1.89). Thirty-day related return visit rates between age groups were similar (9.4% versus 7.6%). Conclusion: Elderly ED observation unit patients had ED observation unit lengths of stay and hospital admission rates that were effective for an ED observation unit setting and ED return visits rates that were comparable with those of younger patients. [Ann Emerg Med. 2003;41:668-677.]