Background Physical activity (PA), fear of falling (FOF) and quality of life (QOL) are very important constructs in geriatrics. The interplay among these constructs may vary between community-dwelling and assisted-living older adults. However, studies comparing the wellbeing of community-dwelling older adults with those residing in the assisted-living facilities (ALFs) are rather rare especially from developing countries. This study was aimed at comparing PA, FOF and QOL between assisted-living and community-dwelling older adults and also determining the correlations amongst the constructs for each group. Methods This cross-sectional survey involved consecutively sampled 114 older adults (≥65 years, ambulant and well-oriented in time, place and person) residing in conveniently selected ALFs (11.3% males) and adjoining communities (54.1% males). PA, FOF and QOL were evaluated using the Physical Activity Scale for the Elderly, the Modified Fall Efficacy Scale and the Short-form Health Survey (SF-36) questionnaire respectively. Data was analysed using descriptive statistics, analysis of covariance and Spearman rank-order correlation test at 0.05 level of significance. Results Participants from the ALFs had significantly lower domain and overall PA (F=5.6–103.34; p< 0.05) and QOL (F=11.12–118.05; p< 0,05) scores than community-dwelling groups. FOF was significantly more prevalent in assisted-living group (p< 0.05). There were significant positive correlations (p< 0.05) between each pair of PA, FOF and QOL for both assisted-living and community-dwelling groups. Conclusions Older adults in the ALFs had lower PA and QOL scores with higher prevalence of FOF than their community-dwelling counterparts. Significant relationships existed between PA, FOF and QOL for participants in either group. Present results may be suggesting that ageing in place ensures better health outcomes than institutionalised ageing. Whenever possible, older adults should therefore be encouraged to age in place rather than moving into ALFs.